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Next week will begin Q2 earnings season in earnest, and as always, those reports will play a critical role in determining the state of the economy, and path of the stock market.
Among the litany of analytics tools at Zacks, the Earnings Expected Surprise Prediction (ESP) might be the coolest. The Earnings ESP looks to find companies that have recently seen positive earnings estimate revision activity. The idea is that more recent information is, generally speaking, more accurate and can be a better predictor of the future, which can give investors an advantage in earnings season.
The technique has proven to be very useful for finding positive surprises. In fact, when combining a Zacks Rank #3 or better and a positive Earnings ESP, stocks produced a positive surprise 70% of the time, while they also saw 28.3% annual returns on average, according to our 10 year backtest.
According to the ESP, Tesla (TSLA - Free Report) , Netflix (NFLX - Free Report) , and PPG Industries (PPG - Free Report) are all set to beat analyst estimates at their scheduled earnings announcements next week. Additionally, all three have very strong long-term expectations with Tesla and Netflix projecting earnings growth greater than 20% annually over the next 3-5 years and PPG Industries set to grow at 18%.
While beating estimates may not always guarantee a stock trade higher, on average it plays favorably so long as there isn’t particularly bad news following the beat. Thus, these three stocks are definitely worth keeping an eye on next week.
Image Source: Zacks Investment Research
Tesla
Tesla is having a tremendous year so far, up 127% YTD, and growing sales even faster than most anticipated. That, along with the news of its charger network set to be standardized for broad adoption in the US, Tesla continues to lead the EV transition.
TSLA’s Earnings ESP is forecasting a 2.41% beat at next weeks quarterly earnings report. Tesla is scheduled to announce its results Wednesday, July 19 after the market close.
Although Telsa has a Zacks Rank #3 (Hold) rating, it has begun to see its earnings estimates rise over the last couple of months. Current quarterly earnings have been revised higher by 3.75% and are expected to climb 9.2% YoY.
Also worth noting, sales are projected to grow a whopping 47% YoY to $25 billion. The automaker is riding on the robust demand for Models 3 and Y, which form a major chunk of its total deliveries. Deliveries of Model 3/Y witnessed a CAGR of more than 100% over the last 3 years.
Image Source: Zacks Investment Research
Netflix
Netflix has staged an incredible comeback so far this year. After collapsing -76% in 2022 the stock has more than doubled off its lows.
Even in the uber-competitive streaming landscape Netflix dominates with 232 million global subscribers, and plenty of room to grow, especially in developing markets.
Image Source: TradingView
According to the Earnings ESP, Netflix is slated to beat earnings by 2.9%. Current quarter earnings are projected to see a -12.2% decline YoY so if the streaming service manages to beat these subdued estimates it could continue its campaign higher.
Furthermore, while near-term earnings are expected to decline, looking further out they are set to see considerable growth. FY24 earnings are expected to grow 31%, along with 13% sales growth, so we can expect the streaming service to continue its expansion, even with the competition nipping at its heels.
Netflix is also trading at a historically discounted valuation. At 40x one year forward earnings it is below the industry average of 51x, and below its five-year median of 60.5x.
Netflix is scheduled to report earnings Wednesday, July 19 after the market closes.
Image Source: Zacks Investment Research
PPG Industries
PPG industries, the global supplier of paints, coatings, chemicals, specialty materials, glass, and fiber glass boasts a Zacks Rank #1 (Strong Buy), indicating strongly upward trending earnings revisions. Current quarter earnings estimates have been revised higher by 0.5% and are expected to climb 18.2% YoY.
The Zacks Earnings ESP also expects PPG to exceed earnings estimates by 2.6% at the coming announcement. PPG reports earnings Thursday July 20, after the market closes.
Always sweetening the deal, PPG also offers a dividend yield of 1.6%. The company has a long history of raising dividend payments and has done so for 51 consecutive years making it one of the few Dividend Kings. The company has increased the payment by an average of 6.5% annually over the last five years.
Image Source: Zacks Investment Research
Bottom Line
The Earnings ESP is just one of many tools investors can use to analyze and pick stocks at Zacks. Combined the all the other useful methodologies developed like the Zacks Rank, investors can gain a huge edge in the markets.
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3 Stocks Expected to Beat Earnings Next Week
Next week will begin Q2 earnings season in earnest, and as always, those reports will play a critical role in determining the state of the economy, and path of the stock market.
Among the litany of analytics tools at Zacks, the Earnings Expected Surprise Prediction (ESP) might be the coolest. The Earnings ESP looks to find companies that have recently seen positive earnings estimate revision activity. The idea is that more recent information is, generally speaking, more accurate and can be a better predictor of the future, which can give investors an advantage in earnings season.
The technique has proven to be very useful for finding positive surprises. In fact, when combining a Zacks Rank #3 or better and a positive Earnings ESP, stocks produced a positive surprise 70% of the time, while they also saw 28.3% annual returns on average, according to our 10 year backtest.
According to the ESP, Tesla (TSLA - Free Report) , Netflix (NFLX - Free Report) , and PPG Industries (PPG - Free Report) are all set to beat analyst estimates at their scheduled earnings announcements next week. Additionally, all three have very strong long-term expectations with Tesla and Netflix projecting earnings growth greater than 20% annually over the next 3-5 years and PPG Industries set to grow at 18%.
While beating estimates may not always guarantee a stock trade higher, on average it plays favorably so long as there isn’t particularly bad news following the beat. Thus, these three stocks are definitely worth keeping an eye on next week.
Image Source: Zacks Investment Research
Tesla
Tesla is having a tremendous year so far, up 127% YTD, and growing sales even faster than most anticipated. That, along with the news of its charger network set to be standardized for broad adoption in the US, Tesla continues to lead the EV transition.
TSLA’s Earnings ESP is forecasting a 2.41% beat at next weeks quarterly earnings report. Tesla is scheduled to announce its results Wednesday, July 19 after the market close.
Although Telsa has a Zacks Rank #3 (Hold) rating, it has begun to see its earnings estimates rise over the last couple of months. Current quarterly earnings have been revised higher by 3.75% and are expected to climb 9.2% YoY.
Also worth noting, sales are projected to grow a whopping 47% YoY to $25 billion. The automaker is riding on the robust demand for Models 3 and Y, which form a major chunk of its total deliveries. Deliveries of Model 3/Y witnessed a CAGR of more than 100% over the last 3 years.
Image Source: Zacks Investment Research
Netflix
Netflix has staged an incredible comeback so far this year. After collapsing -76% in 2022 the stock has more than doubled off its lows.
Even in the uber-competitive streaming landscape Netflix dominates with 232 million global subscribers, and plenty of room to grow, especially in developing markets.
Image Source: TradingView
According to the Earnings ESP, Netflix is slated to beat earnings by 2.9%. Current quarter earnings are projected to see a -12.2% decline YoY so if the streaming service manages to beat these subdued estimates it could continue its campaign higher.
Furthermore, while near-term earnings are expected to decline, looking further out they are set to see considerable growth. FY24 earnings are expected to grow 31%, along with 13% sales growth, so we can expect the streaming service to continue its expansion, even with the competition nipping at its heels.
Netflix is also trading at a historically discounted valuation. At 40x one year forward earnings it is below the industry average of 51x, and below its five-year median of 60.5x.
Netflix is scheduled to report earnings Wednesday, July 19 after the market closes.
Image Source: Zacks Investment Research
PPG Industries
PPG industries, the global supplier of paints, coatings, chemicals, specialty materials, glass, and fiber glass boasts a Zacks Rank #1 (Strong Buy), indicating strongly upward trending earnings revisions. Current quarter earnings estimates have been revised higher by 0.5% and are expected to climb 18.2% YoY.
The Zacks Earnings ESP also expects PPG to exceed earnings estimates by 2.6% at the coming announcement. PPG reports earnings Thursday July 20, after the market closes.
Always sweetening the deal, PPG also offers a dividend yield of 1.6%. The company has a long history of raising dividend payments and has done so for 51 consecutive years making it one of the few Dividend Kings. The company has increased the payment by an average of 6.5% annually over the last five years.
Image Source: Zacks Investment Research
Bottom Line
The Earnings ESP is just one of many tools investors can use to analyze and pick stocks at Zacks. Combined the all the other useful methodologies developed like the Zacks Rank, investors can gain a huge edge in the markets.