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Why Investors Need to Take Advantage of These 2 Construction Stocks Now

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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.

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 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.

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.

In fact, when we combined a Zacks Rank #3 (Hold) or better and a positive Earnings ESP, stocks produced a positive surprise 70% of the time. Perhaps most importantly, using these parameters has helped produce 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 Emcor Group?

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. Emcor Group (EME - Free Report) earns a #1 (Strong Buy) right now and its Most Accurate Estimate sits at $2.74 a share, just 29 days from its upcoming earnings release on October 26, 2023.

By taking the percentage difference between the $2.74 Most Accurate Estimate and the $2.71 Zacks Consensus Estimate, Emcor Group has an Earnings ESP of +1.11%. Investors should also know that EME 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.

EME is part of a big group of Construction stocks that boast a positive ESP, and investors may want to take a look at Dycom Industries (DY - Free Report) as well.

Slated to report earnings on November 28, 2023, Dycom Industries holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is $1.78 a share 62 days from its next quarterly update.

For Dycom Industries, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $1.76 is +0.99%.

EME and DY'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 >>


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


EMCOR Group, Inc. (EME) - free report >>

Dycom Industries, Inc. (DY) - free report >>

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