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Can Commerce (CBSH) Run Higher on Rising Earnings Estimates?

Commerce Bancshares (CBSH) 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 rising trend in estimate revisions, which is a result of growing analyst optimism on the earnings prospects of this bank holding 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.

For Commerce, strong agreement among the covering analysts in revising earnings estimates upward has resulted in meaningful improvement in consensus estimates for the next quarter and full year.

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Current-Quarter Estimate Revisions

The company is expected to earn $0.87 per share for the current quarter, which represents a year-over-year change of -10.31%.

Over the last 30 days, the Zacks Consensus Estimate for Commerce has increased 6.66% because four estimates have moved higher compared to no negative revisions.

Current-Year Estimate Revisions

The company is expected to earn $3.43 per share for the full year, which represents a change of -5.77% from the prior-year number.

The revisions trend for the current year also appears quite promising for Commerce, with five estimates moving higher over the past month compared to no negative revisions. The consensus estimate has also received a boost over this time frame, increasing 5.54%.

Favorable Zacks Rank

The promising estimate revisions have helped Commerce earn 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

Investors have been betting on Commerce because of its solid estimate revisions, as evident from the stock's 5.4% 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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Commerce Bancshares, Inc. (CBSH) : Free Stock Analysis Report

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