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Zacks Earnings ESP: A Better Way to Find Earnings Surprises for Finance
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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.
The earnings figure itself is key, of course, but a beat or miss on the bottom line can sometimes be just as, if not more, important. Therefore, investors should consider paying close attention to these earnings surprises, as a big beat can help a stock climb and vice versa.
Now that we know how important earnings and earnings surprises are, it's time to show investors how to take advantage of these events to boost their returns by utilizing the Zacks Earnings ESP filter.
The Zacks Earnings ESP, Explained
The Zacks Earnings ESP is more formally known as the Expected Surprise Prediction, and it aims to grab the inside track on the latest analyst estimate revisions ahead of a company's report. The idea is relatively intuitive as a newer projection might be based on more complete 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.
Bringing together a positive earnings ESP alongside a Zacks Rank #3 (Hold) or better has helped stocks report a positive earnings surprise 70% of the time. Furthermore, by using these parameters, investors have seen 28.3% annual returns on average, according to our 10 year backtest.
Stocks with a #3 (Hold) ranking, which is most stocks covered at 60%, are expected to perform in-line with the broader market. But stocks that fall into the #2 (Buy) and #1 (Strong Buy) ranking, or the top 15% and top 5% of stocks, respectively, should outperform the market. Strong Buy stocks should outperform more than any other rank.
Should You Consider FS KKR Capital?
The last thing we will do today, now that we have a grasp on the ESP and how powerful of a tool it can be, is to quickly look at a qualifying stock. FS KKR Capital (FSK - Free Report) holds a #2 (Buy) at the moment and its Most Accurate Estimate comes in at $0.74 a share three days away from its upcoming earnings release on November 7, 2022.
FS KKR Capital's Earnings ESP sits at +2.07%, which, as explained above, is calculated by taking the percentage difference between the $0.74 Most Accurate Estimate and the Zacks Consensus Estimate of $0.73. FSK is also part of a large group of stocks that boast a positive ESP. Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they've reported.
FSK is part of a big group of Finance stocks that boast a positive ESP, and investors may want to take a look at Ares Commercial Real Estate (ACRE - Free Report) as well.
Slated to report earnings on February 21, 2023, Ares Commercial Real Estate holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is $0.38 a share 109 days from its next quarterly update.
Ares Commercial Real Estate's Earnings ESP figure currently stands at +0.45% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $0.37.
Because both stocks hold a positive Earnings ESP, FSK and ACRE 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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Zacks Earnings ESP: A Better Way to Find Earnings Surprises for Finance
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.
The earnings figure itself is key, of course, but a beat or miss on the bottom line can sometimes be just as, if not more, important. Therefore, investors should consider paying close attention to these earnings surprises, as a big beat can help a stock climb and vice versa.
Now that we know how important earnings and earnings surprises are, it's time to show investors how to take advantage of these events to boost their returns by utilizing the Zacks Earnings ESP filter.
The Zacks Earnings ESP, Explained
The Zacks Earnings ESP is more formally known as the Expected Surprise Prediction, and it aims to grab the inside track on the latest analyst estimate revisions ahead of a company's report. The idea is relatively intuitive as a newer projection might be based on more complete 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.
Bringing together a positive earnings ESP alongside a Zacks Rank #3 (Hold) or better has helped stocks report a positive earnings surprise 70% of the time. Furthermore, by using these parameters, investors have seen 28.3% annual returns on average, according to our 10 year backtest.
Stocks with a #3 (Hold) ranking, which is most stocks covered at 60%, are expected to perform in-line with the broader market. But stocks that fall into the #2 (Buy) and #1 (Strong Buy) ranking, or the top 15% and top 5% of stocks, respectively, should outperform the market. Strong Buy stocks should outperform more than any other rank.
Should You Consider FS KKR Capital?
The last thing we will do today, now that we have a grasp on the ESP and how powerful of a tool it can be, is to quickly look at a qualifying stock. FS KKR Capital (FSK - Free Report) holds a #2 (Buy) at the moment and its Most Accurate Estimate comes in at $0.74 a share three days away from its upcoming earnings release on November 7, 2022.
FS KKR Capital's Earnings ESP sits at +2.07%, which, as explained above, is calculated by taking the percentage difference between the $0.74 Most Accurate Estimate and the Zacks Consensus Estimate of $0.73. FSK is also part of a large group of stocks that boast a positive ESP. Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they've reported.
FSK is part of a big group of Finance stocks that boast a positive ESP, and investors may want to take a look at Ares Commercial Real Estate (ACRE - Free Report) as well.
Slated to report earnings on February 21, 2023, Ares Commercial Real Estate holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is $0.38 a share 109 days from its next quarterly update.
Ares Commercial Real Estate's Earnings ESP figure currently stands at +0.45% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $0.37.
Because both stocks hold a positive Earnings ESP, FSK and ACRE 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 >>