Surging Earnings Estimates Signal Upside for Scholastic (SCHL) Stock

Scholastic (SCHL) could be a solid choice for investors given the company's remarkably improving earnings outlook. While the stock has been a strong performer lately, this trend might continue since analysts are still raising their earnings estimates for the company.

The rising trend in estimate revisions, which is a result of growing analyst optimism on the earnings prospects of this publishing, education and media company, 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 Scholastic, 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 earnings estimate of $2.45 per share for the current quarter represents a change of +181.6% from the number reported a year ago.

The Zacks Consensus Estimate for Scholastic has increased 37.75% over the last 30 days, as two estimates have gone higher compared to no negative revisions.

Current-Year Estimate Revisions

The company is expected to earn $1.88 per share for the full year, which represents a change of +291.7% from the prior-year number.

There has been an encouraging trend in estimate revisions for the current year as well. Over the past month, two estimates have moved up for Scholastic versus no negative revisions. This has pushed the consensus estimate 31.47% higher.

Favorable Zacks Rank

Thanks to promising estimate revisions, Scholastic currently carries 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

Investors have been betting on Scholastic because of its solid estimate revisions, as evident from the stock's 18% gain over the past four weeks. As its earnings growth prospects might push the stock higher, you may consider adding it to your portfolio right away.

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Scholastic Corporation (SCHL): Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

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