Wall Street watches a company's quarterly report closely to understand as much as possible about its recent performance and what to expect going forward. Of course, one figure often stands out among the rest: earnings.
Life and the stock market are both about expectations, and rising above what is expected is often rewarded, while falling short can come with negative consequences. Investors might want to try to capture stronger returns by finding positive earnings surprises.
The ability to identify stocks that are likely to top quarterly earnings expectations can be profitable, but it's no simple task. Here at Zacks, our Earnings ESP filter helps make things easier.
The Zacks Earnings ESP, Explained
The Zacks Expected Surprise Prediction, or ESP, works by locking in on the most up-to-date analyst earnings revisions because they can be more accurate than estimates from weeks or even months before the actual release date. The thinking is pretty straightforward: analysts who provide earnings estimates closer to the report are likely to have more information.
With this in mind, the Expected Surprise Prediction compares the Most Accurate Estimate (being the most recent) against the overall Zacks Consensus Estimate. The percentage difference provides the ESP figure. The system also utilizes our core Zacks Rank to provide a stronger system for identifying stocks that might beat their next quarterly earnings estimate and possibly see the stock price climb.
When we join a positive earnings ESP with a Zacks Rank #3 (Hold) or stronger, stocks posted a positive bottom-line surprise 70% of the time. Plus, this system saw investors produce roughly 28% annual returns on average, according to our 10 year backtest.
Most stocks, about 60%, fall into the #3 (Hold) category, and they are expected to perform in-line with the broader market. Stocks with a #2 (Buy) and #1 (Strong Buy) rating, or the top 15% and top 5% of stocks, respectively, should outperform the market, with Strong Buy stocks outperforming more than any other rank.
Should You Consider PDC Energy?
Now that we understand what the ESP is and how beneficial it can be, let's dive into a stock that currently fits the bill. PDC Energy earns a #2 (Buy) right now and its Most Accurate Estimate sits at $4.40 a share, just 29 days from its upcoming earnings release on November 2, 2022.
PDCE has an Earnings ESP figure of +5.65%, which, as explained above, is calculated by taking the percentage difference between the $4.40 Most Accurate Estimate and the Zacks Consensus Estimate of $4.17. PDC Energy is one of a large database of stocks with positive ESPs. Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they've reported.
PDCE is just one of a large group of Oils and Energy stocks with a positive ESP figure. Chesapeake Energy is another qualifying stock you may want to consider.
Chesapeake Energy is a Zacks Rank #1 (Strong Buy) stock, and is getting ready to report earnings on November 1, 2022. CHK's Most Accurate Estimate sits at $4.79 a share 28 days from its next earnings release.
Chesapeake Energy's Earnings ESP figure currently stands at +2.57% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $4.67.
Because both stocks hold a positive Earnings ESP, PDCE and CHK could potentially post earnings beats in their next reports.
Find Stocks to Buy or Sell Before They're Reported
Use the Zacks Earnings ESP Filter to turn up stocks with the highest probability of positively, or negatively, surprising to buy or sell before they're reported for profitable earnings season trading. Check it out here >>
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How Investors Can Grab Better Returns for Oils and Energy Using the Zacks ESP Screener
Wall Street watches a company's quarterly report closely to understand as much as possible about its recent performance and what to expect going forward. Of course, one figure often stands out among the rest: earnings.
Life and the stock market are both about expectations, and rising above what is expected is often rewarded, while falling short can come with negative consequences. Investors might want to try to capture stronger returns by finding positive earnings surprises.
The ability to identify stocks that are likely to top quarterly earnings expectations can be profitable, but it's no simple task. Here at Zacks, our Earnings ESP filter helps make things easier.
The Zacks Earnings ESP, Explained
The Zacks Expected Surprise Prediction, or ESP, works by locking in on the most up-to-date analyst earnings revisions because they can be more accurate than estimates from weeks or even months before the actual release date. The thinking is pretty straightforward: analysts who provide earnings estimates closer to the report are likely to have more information.
With this in mind, the Expected Surprise Prediction compares the Most Accurate Estimate (being the most recent) against the overall Zacks Consensus Estimate. The percentage difference provides the ESP figure. The system also utilizes our core Zacks Rank to provide a stronger system for identifying stocks that might beat their next quarterly earnings estimate and possibly see the stock price climb.
When we join a positive earnings ESP with a Zacks Rank #3 (Hold) or stronger, stocks posted a positive bottom-line surprise 70% of the time. Plus, this system saw investors produce roughly 28% annual returns on average, according to our 10 year backtest.
Most stocks, about 60%, fall into the #3 (Hold) category, and they are expected to perform in-line with the broader market. Stocks with a #2 (Buy) and #1 (Strong Buy) rating, or the top 15% and top 5% of stocks, respectively, should outperform the market, with Strong Buy stocks outperforming more than any other rank.
Should You Consider PDC Energy?
Now that we understand what the ESP is and how beneficial it can be, let's dive into a stock that currently fits the bill. PDC Energy earns a #2 (Buy) right now and its Most Accurate Estimate sits at $4.40 a share, just 29 days from its upcoming earnings release on November 2, 2022.
PDCE has an Earnings ESP figure of +5.65%, which, as explained above, is calculated by taking the percentage difference between the $4.40 Most Accurate Estimate and the Zacks Consensus Estimate of $4.17. PDC Energy is one of a large database of stocks with positive ESPs. Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they've reported.
PDCE is just one of a large group of Oils and Energy stocks with a positive ESP figure. Chesapeake Energy is another qualifying stock you may want to consider.
Chesapeake Energy is a Zacks Rank #1 (Strong Buy) stock, and is getting ready to report earnings on November 1, 2022. CHK's Most Accurate Estimate sits at $4.79 a share 28 days from its next earnings release.
Chesapeake Energy's Earnings ESP figure currently stands at +2.57% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $4.67.
Because both stocks hold a positive Earnings ESP, PDCE and CHK could potentially post earnings beats in their next reports.
Find Stocks to Buy or Sell Before They're Reported
Use the Zacks Earnings ESP Filter to turn up stocks with the highest probability of positively, or negatively, surprising to buy or sell before they're reported for profitable earnings season trading. Check it out here >>