The market expects BioXcel Therapeutics, Inc. (BTAI) to deliver a year-over-year increase in earnings on lower revenues when it reports results for the quarter ended December 2024. This widely-known consensus outlook is important in assessing the company's earnings picture, but a powerful factor that might influence its near-term stock price is how the actual results compare to these estimates.
The stock might move higher if these key numbers top expectations in the upcoming earnings report. On the other hand, if they miss, the stock may move lower.
While the sustainability of the immediate price change and future earnings expectations will mostly depend on management's discussion of business conditions on the earnings call, it's worth handicapping the probability of a positive EPS surprise.
This company is expected to post quarterly loss of $4.36 per share in its upcoming report, which represents a year-over-year change of +64.1%.
Revenues are expected to be $0.15 million, down 60.5% from the year-ago quarter.
The consensus EPS estimate for the quarter has remained unchanged over the last 30 days. This is essentially a reflection of how the covering analysts have collectively reassessed their initial estimates over this period.
Investors should keep in mind that the direction of estimate revisions by each of the covering analysts may not always get reflected in the aggregate change.
Estimate revisions ahead of a company's earnings release offer clues to the business conditions for the period whose results are coming out. Our proprietary surprise prediction model -- the Zacks Earnings ESP (Expected Surprise Prediction) -- has this insight at its core.
The Zacks Earnings ESP compares the Most Accurate Estimate to the Zacks Consensus Estimate for the quarter; the Most Accurate Estimate is a more recent version of the Zacks Consensus EPS estimate. The idea here is that analysts revising their estimates right before an earnings release have the latest information, which could potentially be more accurate than what they and others contributing to the consensus had predicted earlier.
Thus, a positive or negative Earnings ESP reading theoretically indicates the likely deviation of the actual earnings from the consensus estimate. However, the model's predictive power is significant for positive ESP readings only.
A positive Earnings ESP is a strong predictor of an earnings beat, particularly when combined with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). Our research shows that stocks with this combination produce a positive surprise nearly 70% of the time, and a solid Zacks Rank actually increases the predictive power of Earnings ESP.
Please note that a negative Earnings ESP reading is not indicative of an earnings miss. Our research shows that it is difficult to predict an earnings beat with any degree of confidence for stocks with negative Earnings ESP readings and/or Zacks Rank of 4 (Sell) or 5 (Strong Sell).
For BioXcel Therapeutics, the Most Accurate Estimate is lower than the Zacks Consensus Estimate, suggesting that analysts have recently become bearish on the company's earnings prospects. This has resulted in an Earnings ESP of -15.50%.
On the other hand, the stock currently carries a Zacks Rank of #2.
So, this combination makes it difficult to conclusively predict that BioXcel Therapeutics will beat the consensus EPS estimate.
Analysts often consider to what extent a company has been able to match consensus estimates in the past while calculating their estimates for its future earnings. So, it's worth taking a look at the surprise history for gauging its influence on the upcoming number.
For the last reported quarter, it was expected that BioXcel Therapeutics would post a loss of $8 per share when it actually produced a loss of $5.12, delivering a surprise of +36%.
Over the last four quarters, the company has beaten consensus EPS estimates three times.
An earnings beat or miss may not be the sole basis for a stock moving higher or lower. Many stocks end up losing ground despite an earnings beat due to other factors that disappoint investors. Similarly, unforeseen catalysts help a number of stocks gain despite an earnings miss.
That said, betting on stocks that are expected to beat earnings expectations does increase the odds of success. This is why it's worth checking a company's Earnings ESP and Zacks Rank ahead of its quarterly release. Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they've reported.
BioXcel Therapeutics doesn't appear a compelling earnings-beat candidate. However, investors should pay attention to other factors too for betting on this stock or staying away from it ahead of its earnings release.
Another stock from the Zacks Medical - Biomedical and Genetics industry, IGM Biosciences, Inc. (IGMS), is soon expected to post loss of $0.72 per share for the quarter ended December 2024. This estimate indicates a year-over-year change of +28.7%. Revenues for the quarter are expected to be $0.53 million, down 18.5% from the year-ago quarter.
Over the last 30 days, the consensus EPS estimate for IGM Biosciences has remained unchanged. Nevertheless, the company now has an Earnings ESP of 4.55%, reflecting a higher Most Accurate Estimate.
When combined with a Zacks Rank of #2 (Buy), this Earnings ESP indicates that IGM Biosciences will most likely beat the consensus EPS estimate. Over the last four quarters, the company surpassed consensus EPS estimates two times.
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BioXcel Therapeutics, Inc. (BTAI) : Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).
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