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How to Find Strong Finance Stocks Slated for Positive Earnings Surprises
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Earnings are arguably the most important single number on a company's quarterly financial report. Wall Street clearly dives into all of the other metrics and management's input, but the EPS figure helps cut through all the noise.
We know earnings results are vital, but how a company performs compared to bottom line expectations can be even more important when it comes to stock prices, especially in the near-term. This means that investors might want to take advantage of these earnings surprises.
Hunting for 'earnings whispers' or companies poised to beat their quarterly earnings estimates is a somewhat common practice. But that doesn't make it easy. One way that has been proven to work is by using the Zacks Earnings ESP tool.
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.
Now that we understand the basic idea, let's look at how the Expected Surprise Prediction works. The ESP is calculated by comparing the Most Accurate Estimate to the Zacks Consensus Estimate, with the percentage difference between the two giving us the Zacks ESP figure.
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.
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 Wells Fargo?
The final step today is to look at a stock that meets our ESP qualifications. Wells Fargo (WFC - Free Report) earns a #3 (Hold) 14 days from its next quarterly earnings release on April 14, 2023, and its Most Accurate Estimate comes in at $1.19 a share.
By taking the percentage difference between the $1.19 Most Accurate Estimate and the $1.18 Zacks Consensus Estimate, Wells Fargo has an Earnings ESP of +0.57%. Investors should also know that WFC is one of a large group 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.
WFC is one of just a large database of Finance stocks with positive ESPs. Another solid-looking stock is Apple Hospitality REIT (APLE - Free Report) .
Apple Hospitality REIT is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on May 2, 2023. APLE's Most Accurate Estimate sits at $0.37 a share 32 days from its next earnings release.
The Zacks Consensus Estimate for Apple Hospitality REIT is $0.34, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +7.77%.
WFC and APLE's positive ESP figures tell us that both stocks have a good chance at beating analyst expectations in their next earnings report.
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 to Find Strong Finance Stocks Slated for Positive Earnings Surprises
Earnings are arguably the most important single number on a company's quarterly financial report. Wall Street clearly dives into all of the other metrics and management's input, but the EPS figure helps cut through all the noise.
We know earnings results are vital, but how a company performs compared to bottom line expectations can be even more important when it comes to stock prices, especially in the near-term. This means that investors might want to take advantage of these earnings surprises.
Hunting for 'earnings whispers' or companies poised to beat their quarterly earnings estimates is a somewhat common practice. But that doesn't make it easy. One way that has been proven to work is by using the Zacks Earnings ESP tool.
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.
Now that we understand the basic idea, let's look at how the Expected Surprise Prediction works. The ESP is calculated by comparing the Most Accurate Estimate to the Zacks Consensus Estimate, with the percentage difference between the two giving us the Zacks ESP figure.
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.
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 Wells Fargo?
The final step today is to look at a stock that meets our ESP qualifications. Wells Fargo (WFC - Free Report) earns a #3 (Hold) 14 days from its next quarterly earnings release on April 14, 2023, and its Most Accurate Estimate comes in at $1.19 a share.
By taking the percentage difference between the $1.19 Most Accurate Estimate and the $1.18 Zacks Consensus Estimate, Wells Fargo has an Earnings ESP of +0.57%. Investors should also know that WFC is one of a large group 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.
WFC is one of just a large database of Finance stocks with positive ESPs. Another solid-looking stock is Apple Hospitality REIT (APLE - Free Report) .
Apple Hospitality REIT is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on May 2, 2023. APLE's Most Accurate Estimate sits at $0.37 a share 32 days from its next earnings release.
The Zacks Consensus Estimate for Apple Hospitality REIT is $0.34, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +7.77%.
WFC and APLE's positive ESP figures tell us that both stocks have a good chance at beating analyst expectations in their next earnings report.
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 >>