Geo Group (GEO) appears an attractive pick given a noticeable improvement in the company's earnings outlook. The stock has been a strong performer lately, and the momentum might continue with analysts still raising their earnings estimates for the company.
The upward trend in estimate revisions for this private prison operator reflects growing optimism of analysts on its earnings prospects, which should get reflected in its stock price. After all, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements. This insight is at the core of our stock rating tool -- the Zacks Rank.
The five-grade Zacks Rank system, which ranges from a Zacks Rank #1 (Strong Buy) to a Zacks Rank #5 (Strong Sell), has an impressive externally-audited track record of outperformance, with Zacks #1 Ranked stocks generating an average annual return of +25% since 2008.
Consensus earnings estimates for the next quarter and full year have moved considerably higher for Geo Group, as there has been strong agreement among the covering analysts in raising estimates.
The chart below shows the evolution of forward 12-month Zacks Consensus EPS estimate:
12 Month EPS
Current-Quarter Estimate Revisions
The company is expected to earn $0.35 per share for the current quarter, which represents a year-over-year change of +40.0%.
The Zacks Consensus Estimate for Geo Group has increased 16.48% over the last 30 days, as three estimates have gone higher compared to no negative revisions.
Current-Year Estimate Revisions
The company is expected to earn $1.31 per share for the full year, which represents a change of +52.3% from the prior-year number.
The revisions trend for the current year also appears quite promising for Geo Group, with three estimates moving higher over the past month compared to no negative revisions. The consensus estimate has also received a boost over this time frame, increasing 8.89%.
Favorable Zacks Rank
The promising estimate revisions have helped Geo Group earn a Zacks Rank #1 (Strong Buy). The Zacks Rank is a tried-and-tested rating tool that helps investors effectively harness the power of earnings estimate revisions and make the right investment decision.
You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Our research shows that stocks with Zacks Rank #1 (Strong Buy) and 2 (Buy) significantly outperform the S&P 500.
Bottom Line
While strong estimate revisions for Geo Group have attracted decent investments and pushed the stock 6.6% higher over the past four weeks, further upside may still be left in the stock. So, you may consider adding it to your portfolio right away.
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Geo Group Inc (The) (GEO): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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