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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.
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.
The core of the ESP model is comparing the Most Accurate Estimate to the Zacks Consensus Estimate, where the resulting percentage difference between the two equals the Expected Surprise Prediction. The Zacks Rank is also factored into the ESP metric to better help find companies that appear poised to top their next bottom-line consensus estimate, which will hopefully help lift the stock price.
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.
Stocks with a ranking of #3 (Hold), or 60% of all stocks covered by the Zacks Rank, are expected to perform in-line with the broader market. Stocks with rankings of #2 (Buy) and #1 (Strong Buy), 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 American Tower?
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. American Tower (AMT - Free Report) earns a #3 (Hold) right now and its Most Accurate Estimate sits at $2.38 a share, just 30 days from its upcoming earnings release on October 26, 2023.
By taking the percentage difference between the $2.38 Most Accurate Estimate and the $2.18 Zacks Consensus Estimate, American Tower has an Earnings ESP of +9.05%. Investors should also know that AMT 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.
AMT is part of a big group of Finance stocks that boast a positive ESP, and investors may want to take a look at SL Green (SLG - Free Report) as well.
SL Green is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on October 18, 2023. SLG's Most Accurate Estimate sits at $1.34 a share 22 days from its next earnings release.
The Zacks Consensus Estimate for SL Green is $1.29, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +3.76%.
AMT and SLG's positive ESP metrics may signal that a positive earnings surprise for both stocks is on the horizon.
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.
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.
The core of the ESP model is comparing the Most Accurate Estimate to the Zacks Consensus Estimate, where the resulting percentage difference between the two equals the Expected Surprise Prediction. The Zacks Rank is also factored into the ESP metric to better help find companies that appear poised to top their next bottom-line consensus estimate, which will hopefully help lift the stock price.
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.
Stocks with a ranking of #3 (Hold), or 60% of all stocks covered by the Zacks Rank, are expected to perform in-line with the broader market. Stocks with rankings of #2 (Buy) and #1 (Strong Buy), 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 American Tower?
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. American Tower (AMT - Free Report) earns a #3 (Hold) right now and its Most Accurate Estimate sits at $2.38 a share, just 30 days from its upcoming earnings release on October 26, 2023.
By taking the percentage difference between the $2.38 Most Accurate Estimate and the $2.18 Zacks Consensus Estimate, American Tower has an Earnings ESP of +9.05%. Investors should also know that AMT 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.
AMT is part of a big group of Finance stocks that boast a positive ESP, and investors may want to take a look at SL Green (SLG - Free Report) as well.
SL Green is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on October 18, 2023. SLG's Most Accurate Estimate sits at $1.34 a share 22 days from its next earnings release.
The Zacks Consensus Estimate for SL Green is $1.29, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +3.76%.
AMT and SLG's positive ESP metrics may signal that a positive earnings surprise for both stocks is on the horizon.
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 >>