Press Release: Livanova To Present At The Stifel, Wolfe, And Piper Sandler Healthcare Conferences

LivaNova (LIVN) 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 sole determinant of the Zacks rating is a company's changing earnings picture. The Zacks Consensus Estimate -- the consensus of EPS estimates from the sell-side analysts covering the stock -- for the current and following years is tracked by the system.

The power of a changing earnings picture in determining near-term stock price movements makes the Zacks rating system highly useful for individual investors, since it can be difficult to make decisions based on rating upgrades by Wall Street analysts. These are mostly driven by subjective factors that are hard to see and measure in real time.

Therefore, the Zacks rating upgrade for LivaNova basically reflects positivity about its earnings outlook that could translate into buying pressure and an increase in its stock price.

Most Powerful Force Impacting Stock Prices

The change in a company's future earnings potential, as reflected in earnings estimate revisions, has proven to be strongly correlated with the near-term price movement of its stock. That's partly because of the influence of institutional investors that use earnings and earnings estimates for calculating the fair value of a company's shares. An increase or decrease in earnings estimates in their valuation models simply results in higher or lower fair value for a stock, and institutional investors typically buy or sell it. Their transaction of large amounts of shares then leads to price movement for the stock.

Fundamentally speaking, rising earnings estimates and the consequent rating upgrade for LivaNova imply an improvement in the company's underlying business. Investors should show their appreciation for this improving business trend by pushing the stock higher.

Harnessing the Power of Earnings Estimate Revisions

As empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock movements, tracking such revisions for making an investment decision could be truly rewarding. Here is where the tried-and-tested Zacks Rank stock-rating system plays an important role, as it effectively harnesses the power of earnings estimate revisions.

The Zacks Rank stock-rating system, which uses four factors related to earnings estimates to classify stocks into five groups, ranging from Zacks Rank #1 (Strong Buy) to Zacks Rank #5 (Strong Sell), has an impressive externally-audited track 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 LivaNova

This medical technology company is expected to earn $3.37 per share for the fiscal year ending December 2024, which represents a year-over-year change of 20.4%.

Analysts have been steadily raising their estimates for LivaNova. Over the past three months, the Zacks Consensus Estimate for the company has increased 10.3%.

Bottom Line

Unlike the overly optimistic Wall Street analysts whose rating systems tend to be weighted toward favorable recommendations, the Zacks rating system maintains an equal proportion of 'buy' and 'sell' ratings for its entire universe of more than 4000 stocks at any point in time. Irrespective of market conditions, only the top 5% of the Zacks-covered stocks get a 'Strong Buy' rating and the next 15% get a 'Buy' rating. So, the placement of a stock in the top 20% of the Zacks-covered stocks indicates its superior earnings estimate revision feature, making it a solid candidate for producing market-beating returns in the near term.

The upgrade of LivaNova to a Zacks Rank #1 positions it in the top 5% of the Zacks-covered stocks in terms of estimate revisions, implying that the stock might move higher in the near term.

Zacks Investment Research

Here are three stocks with buy rank and strong momentum characteristics for investors to consider today, November 7th:

Kura Sushi USA, Inc. KRUS: This Japanese restaurant chain has a Zacks Rank #1 and witnessed the Zacks Consensus Estimate for its current year earnings increasing 21.2% over the last 60 days.

Kura Sushi USA, Inc. Price and Consensus

Kura Sushi USA, Inc. price-consensus-chart | Kura Sushi USA, Inc. Quote

Kura Sushi’s shares gained 78.4% over the last three months compared with the S&P 500’s advance of 11.3%. The company possesses a Momentum Score of A.

Kura Sushi USA, Inc. Price

Kura Sushi USA, Inc. price | Kura Sushi USA, Inc. Quote

Frontdoor, Inc. FTDR: This home warranties company has a Zacks Rank #1 and witnessed the Zacks Consensus Estimate for its current year earnings increasing 5.7% over the last 60 days.

Frontdoor Inc. Price and Consensus

Frontdoor Inc. price-consensus-chart | Frontdoor Inc. Quote

Frontdoor’ shares gained 28.2% over the last three months compared with the S&P 500’s advance of 11.3%. The company possesses a Momentum Score of A.

Frontdoor Inc. Price

Frontdoor Inc. price | Frontdoor Inc. Quote

LivaNova PLC LIVN: This medical device company has a Zacks Rank #1 and witnessed the Zacks Consensus Estimate for its current year earnings increasing nearly 7% over the last 60 days.

LivaNova PLC Price and Consensus

LivaNova PLC price-consensus-chart | LivaNova PLC Quote

LivaNova’s shares gained 15.8% over the last three months compared with the S&P 500’s advance of 11.3%. The company possesses a Momentum Score of A.

LivaNova PLC Price

LivaNova PLC price | LivaNova PLC Quote

See the full list of top ranked stocks here

Learn more about the Momentum score and how it is calculated here.

Zacks Investment Research

LivaNova (LIVN) closed the last trading session at $52.10, gaining 0% over the past four weeks, but there could be plenty of upside left in the stock if short-term price targets set by Wall Street analysts are any guide. The mean price target of $72 indicates a 38.2% upside potential.

The mean estimate comprises nine short-term price targets with a standard deviation of $8.15. While the lowest estimate of $61 indicates a 17.1% increase from the current price level, the most optimistic analyst expects the stock to surge 72.7% to reach $90. It's very important to note the standard deviation here, as it helps understand the variability of the estimates. The smaller the standard deviation, the greater the agreement among analysts.

While the consensus price target is highly sought after by investors, the ability and unbiasedness of analysts in setting price targets have long been questionable. And investors making investment decisions solely based on this tool would arguably do themselves a disservice.

But, for LIVN, an impressive average price target is not the only indicator of a potential upside. Strong agreement among analysts about the company's ability to report better earnings than they predicted earlier strengthens this view. While a positive trend in earnings estimate revisions doesn't gauge how much a stock could gain, it has proven to be powerful in predicting an upside.

Here's What You Should Know About Analysts' Price Targets

According to researchers at several universities across the globe, a price target is one of many pieces of information about a stock that misleads investors far more often than it guides. In fact, empirical research shows that price targets set by several analysts, irrespective of the extent of agreement, rarely indicate where the price of a stock could actually be heading.

While Wall Street analysts have deep knowledge of a company's fundamentals and the sensitivity of its business to economic and industry issues, many of them tend to set overly optimistic price targets. Are you wondering why?

They usually do that to drum up interest in shares of companies that their firms either have existing business relationships with or are looking to be associated with. In other words, business incentives of firms covering a stock often result in inflated price targets set by analysts.

However, a tight clustering of price targets, which is represented by a low standard deviation, indicates that analysts have a high degree of agreement about the direction and magnitude of a stock's price movement. While that doesn't necessarily mean the stock will hit the average price target, it could be a good starting point for further research aimed at identifying the potential fundamental driving forces.

That said, while investors should not entirely ignore price targets, making an investment decision solely based on them could lead to disappointing ROI. So, price targets should always be treated with a high degree of skepticism.

Why LIVN Could Witness a Solid Upside

There has been increasing optimism among analysts lately about the company's earnings prospects, as indicated by strong agreement among them in revising EPS estimates higher. And that could be a legitimate reason to expect an upside in the stock. After all, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements.

Over the last 30 days, the Zacks Consensus Estimate for the current year has increased 10.3%, as three estimates have moved higher compared to no negative revision.

Moreover, LIVN currently has a Zacks Rank #1 (Strong Buy), which means it is in the top 5% of more than the 4,000 stocks that we rank based on four factors related to earnings estimates. Given an impressive externally-audited track record, this is a more conclusive indication of the stock's potential upside in the near term. You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here

Therefore, while the consensus price target may not be a reliable indicator of how much LIVN could gain, the direction of price movement it implies does appear to be a good guide.

Zacks Investment Research