Bear Of The Day: Encore Wire

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Encore Wire (WIRE) is a Zacks Rank #5 (Strong Sell) has seen earnings estimates slide lower recently following a recent miss of the Zacks Consensus Estimate. This article will look at why this stock is a Zacks Rank #5 (Strong Sell) as it is the Bear of the Day.

 

Description

Encore Wire Corporation is a low-cost manufacturer of copper electrical building wire and cable. The Company is a significant supplier of both residential wire for interior electrical wiring in homes, apartments and manufactured housing, as well as building wire for electrical distribution in commercial and industrial buildings.

 

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 WIRE, I see three straight beats of the Zacks Consensus Estimate followed up most recently by a miss.  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 FSWB I see annual estimates moving lower of late.

The current fiscal year consensus number moved lower from $22.84 to $21.35 over the last 60 days. 

The next year has moved from $18.36 to $17.11 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 lot of stocks in the Zacks universe are seeing negative 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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