Barrick gold (GOLD – Free Report) could be a solid addition to your portfolio given its recent upgrade to a Zacks Rank #1 (Strong Buy). This rating change essentially reflects an upward trend in earnings estimates – one of the most powerful forces impacting stock prices.
The Zacks rating depends solely on a company’s changing earnings picture. It tracks the current and next year EPS estimates from the sell-side analysts who cover the stock via a consensus measure: the Zacks Consensus Estimate.
Individual investors often find it difficult to make decisions based on rating upgrades by Wall Street analysts because they are usually driven by subjective factors that are difficult to see and measure in real time. In these situations, the Zacks Rating System comes in handy because of the power of a changing earnings picture in determining near-term stock price movements.
As such, the Zacks rating upgrade for Barrick Gold is essentially a positive commentary on its earnings outlook, which could have a favorable impact on its stock price.
Most powerful force affecting stock prices
The change in a company’s future earnings potential, as reflected in earnings estimate revisions, and near-term stock price movements have been proven to be strongly correlated. That’s partly due to the influence of institutional investors who use earnings and earnings estimates to calculate the fair value of a company’s shares. An increase or decrease in earnings expectations in their valuation models simply results in a higher or lower fair value of a stock, and institutional investors typically buy or sell it. Their bulk investing action then leads to price movements for the stock.
For Barrick Gold, rising earnings expectations and the resulting rating upgrade fundamentally mean an improvement in the company’s underlying business. And investors’ appreciation for this improving business trend should push the stock higher.
Harnessing the power of earnings estimate revisions
Empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock movements. So it could really pay off if such revisions are followed when making an investment decision. This is where the proven Zacks Rank stock rating system plays an important role, as it effectively uses the power of earnings estimate revisions.
The Zacks Rank stock rating system, which uses four factors related to earnings expectations to categorize stocks into five groups ranging from Zacks Rank #1 (Strong Buy) to Zacks Rank #5 (Strong Sell), has an impressive outside-audited track record . record, with Zacks Rank #1 stocks generating an average annual return of +25% since 1988. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here >>>>.
Earnings estimate revisions for Barrick Gold
For the fiscal year ending December 2024, this gold and copper mining company is expected to earn $1.27 per share, which is a change of 51.2% from the year-ago number reported.
Analysts have been steadily raising their estimates for Barrick Gold. Over the past three months, the Zacks Consensus Estimate for the company has risen 17.9%.
In short
Unlike overly optimistic Wall Street analysts whose rating systems tend to skew toward favorable recommendations, the Zacks rating system maintains an equal ratio of “buy” and “sell” ratings for the entire universe of more than 4000 shares. Regardless of market conditions, only the top 5% of Zacks-covered stocks are rated “Strong Buy” and the next 15% are rated “Buy.” Thus, a stock’s placement in the top 20% of Zacks-covered stocks indicates its superior earnings estimate revisions, making it a solid candidate to generate market-beating returns in the near term.
Learn more about the Zacks Rank here >>>
Barrick Gold’s upgrade to Zacks Rank #1 positions it in the top 5% of Zacks-covered stocks in terms of estimate revisions, implying the stock could move higher in the near term.