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How to Find Strong Finance Stocks Slated for Positive Earnings Surprises
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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.
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.
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 Bank of America?
The final step today is to look at a stock that meets our ESP qualifications. Bank of America (BAC - Free Report) earns a #3 (Hold) eight days from its next quarterly earnings release on October 17, 2023, and its Most Accurate Estimate comes in at $0.82 a share.
Bank of America's Earnings ESP sits at +1.54%, which, as explained above, is calculated by taking the percentage difference between the $0.82 Most Accurate Estimate and the Zacks Consensus Estimate of $0.81. BAC 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.
BAC is part of a big group of Finance stocks that boast a positive ESP, and investors may want to take a look at OneMain Holdings (OMF - Free Report) as well.
Slated to report earnings on October 25, 2023, OneMain Holdings holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is $1.53 a share 16 days from its next quarterly update.
The Zacks Consensus Estimate for OneMain Holdings is $1.52, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +0.63%.
Because both stocks hold a positive Earnings ESP, BAC and OMF 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 to Find Strong Finance Stocks Slated for Positive Earnings Surprises
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.
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.
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 Bank of America?
The final step today is to look at a stock that meets our ESP qualifications. Bank of America (BAC - Free Report) earns a #3 (Hold) eight days from its next quarterly earnings release on October 17, 2023, and its Most Accurate Estimate comes in at $0.82 a share.
Bank of America's Earnings ESP sits at +1.54%, which, as explained above, is calculated by taking the percentage difference between the $0.82 Most Accurate Estimate and the Zacks Consensus Estimate of $0.81. BAC 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.
BAC is part of a big group of Finance stocks that boast a positive ESP, and investors may want to take a look at OneMain Holdings (OMF - Free Report) as well.
Slated to report earnings on October 25, 2023, OneMain Holdings holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is $1.53 a share 16 days from its next quarterly update.
The Zacks Consensus Estimate for OneMain Holdings is $1.52, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +0.63%.
Because both stocks hold a positive Earnings ESP, BAC and OMF 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 >>