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Surging Earnings Estimates Signal Upside for Tencent Music Entertainment Group (TME) Stock

Zacks Equity Research
·2 min read

Tencent Music Entertainment Group Sponsored ADR (TME) 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 company 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 -- has this insight at its core.

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 Tencent Music Entertainment Group, 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.

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

12 Month EPS

Current-Quarter Estimate Revisions

The company is expected to earn $0.17 per share for the current quarter, which represents a year-over-year change of +30.77%.

Over the last 30 days, the Zacks Consensus Estimate for Tencent Music Entertainment Group has increased 10.71% because two estimates have moved higher compared to no negative revisions.

Current-Year Estimate Revisions

For the full year, the earnings estimate of $0.68 per share represents a change of +28.3% from the year-ago number.

There has been an encouraging trend in estimate revisions for the current year as well. Over the past month, two estimates have moved up for Tencent Music Entertainment Group versus no negative revisions. This has pushed the consensus estimate 6.9% higher.

Favorable Zacks Rank

The promising estimate revisions have helped Tencent Music Entertainment Group 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

While strong estimate revisions for Tencent Music Entertainment Group have attracted decent investments and pushed the stock 14.4% 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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Tencent Music Entertainment Group Sponsored ADR (TME) : Free Stock Analysis Report

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Zacks Investment Research