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Surging Earnings Estimates Signal Upside for Plains GP (PAGP) Stock

Zacks Equity Research

Investors might want to bet on Plains GP Holdings (PAGP), as earnings estimates for this company have been showing solid improvement lately. The stock has already gained solid short-term price momentum, and this trend might continue with its still improving earnings outlook.

The rising trend in estimate revisions, which is a result of growing analyst optimism on the earnings prospects of this oil and gas 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. 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 Plains GP, 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 $0.31 per share, which is a change of -22.5% from the year-ago reported number.

Over the last 30 days, the Zacks Consensus Estimate for Plains GP has increased 16.05% because two estimates have moved higher while one has gone lower.

Current-Year Estimate Revisions

The company is expected to earn $1.54 per share for the full year, which represents a change of -21.43% from the prior-year number.

The revisions trend for the current year also appears quite promising for Plains GP, with one estimate moving higher over the past month compared to three negative revisions. The consensus estimate has also received a boost over this time frame, increasing 6.3%.

Favorable Zacks Rank

The promising estimate revisions have helped Plains GP 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 Plains GP have attracted decent investments and pushed the stock 26.7% 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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