Brooks Automation (BRKS) is a Zacks Rank #5 (Strong Sell) after missing the Wall Street Consensus Estimate in the most recent quarter.  Stocks that miss the number don’t always fall to a Zacks Rank #5 (Strong Sell) so let’s take a look at why that is the case in this Bear of the Day article.

Description

Brooks Automation is a leading worldwide provider of automation, vacuum, and instrumentation solutions for multiple markets including semiconductor manufacturing, life sciences, and clean energy. Their technologies, engineering competencies, and global service capabilities provide customers speed to market, and ensure high uptime and rapid response, which equate to superior value in their mission-critical controlled environments.

Earnings History

When I look at a stock, the first thing I do is look to see if the company is beating the number.  This tells me right away where the market’s expectations have been for the company and how management has communicated to the market.  A stock that consistently beats has management communicating expectations to Wall Street that can be achieved.  That is what you want to see.

In the case of BRKS, I see three beats and one miss of the Zacks Consensus Estimate over the last year.  This alone does not make the stock a Zacks Rank #1 (Strong Buy) and it doesn’t make it a Zacks Rank #5 (Strong Sell) either.

The Zacks Rank does care about the earnings history, but it is much more heavily influenced by the movement of earnings estimates.

Earnings Estimates

The Zacks Rank tells us which stocks are seeing earnings estimates move higher or in this case lower.  For BRKS I see estimates dropping.

This quarter is dropped from $0.74 to $0.09.

Next quarter has seen a similar drop to $0.11 from $0.77

The Zacks Rank is more heavily influenced by the move in the annual numbers, and the movement is mixed for those numbers.

The 2021 consensus number has decreased from $3.01 to $0.52.

The 2022 number has dropped from $3.24 to $0.66 over the last 60 days.

Negative movement in earnings estimates like that is why this stock is a Zacks Rank #5 (Strong Sell).

It should be noted that a majority of stocks in the Zacks universe are seeing positive earnings estimate revisions.  That means that the stocks that are seeing small but negative earnings estimate revisions are falling to a Zacks Rank #5 (Strong Sell).

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