Why Coherent (COHR) Might be Well Poised for a Surge

Coherent (COHR) 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 Laser and optics manufacturer 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. Our stock rating tool -- the Zacks Rank -- is principally built on this insight.

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.

For Coherent, there has been strong agreement among the covering analysts in raising earnings estimates, which has helped push consensus estimates considerably higher for the next quarter and full year.

The chart below shows the evolution of forward 12-month Zacks Consensus EPS estimate:

12 Month EPS

Current-Quarter Estimate Revisions

For the current quarter, the company is expected to earn $1.20 per share, which is a change of +26.3% from the year-ago reported number.

Over the last 30 days, six estimates have moved higher for Coherent compared to no negative revisions. As a result, the Zacks Consensus Estimate has increased 10.28%.

Current-Year Estimate Revisions

For the full year, the earnings estimate of $5.02 per share represents a change of +42.2% from the year-ago number.

In terms of estimate revisions, the trend for the current year also appears quite encouraging for Coherent. Over the past month, seven estimates have moved higher compared to no negative revisions, helping the consensus estimate increase 11.62%.

Favorable Zacks Rank

Thanks to promising estimate revisions, Coherent currently carries a Zacks Rank #2 (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 Coherent have attracted decent investments and pushed the stock 44.5% 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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This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research

Source Zacks-com