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How to Boost Your Portfolio with Top Oils and Energy Stocks Set to Beat Earnings
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Two factors often determine stock prices in the long run: earnings and interest rates. Investors can't control the latter, but they can focus on a company's earnings results every quarter.
Life and the stock market are both about expectations, and rising above what is expected is often rewarded, while falling short can come with negative consequences. Investors might want to try to capture stronger returns by finding positive earnings surprises.
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 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.
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.
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 Devon Energy?
The final step today is to look at a stock that meets our ESP qualifications. Devon Energy (DVN - Free Report) earns a #3 (Hold) 26 days from its next quarterly earnings release on November 7, 2023, and its Most Accurate Estimate comes in at $1.54 a share.
By taking the percentage difference between the $1.54 Most Accurate Estimate and the $1.51 Zacks Consensus Estimate, Devon Energy has an Earnings ESP of +2.19%. Investors should also know that DVN 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.
DVN is part of a big group of Oils and Energy stocks that boast a positive ESP, and investors may want to take a look at Diamondback Energy (FANG - Free Report) as well.
Diamondback Energy is a Zacks Rank #2 (Buy) stock, and is getting ready to report earnings on November 6, 2023. FANG's Most Accurate Estimate sits at $4.80 a share 25 days from its next earnings release.
The Zacks Consensus Estimate for Diamondback Energy is $4.72, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +1.67%.
DVN and FANG'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 Boost Your Portfolio with Top Oils and Energy Stocks Set to Beat Earnings
Two factors often determine stock prices in the long run: earnings and interest rates. Investors can't control the latter, but they can focus on a company's earnings results every quarter.
Life and the stock market are both about expectations, and rising above what is expected is often rewarded, while falling short can come with negative consequences. Investors might want to try to capture stronger returns by finding positive earnings surprises.
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 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.
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.
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 Devon Energy?
The final step today is to look at a stock that meets our ESP qualifications. Devon Energy (DVN - Free Report) earns a #3 (Hold) 26 days from its next quarterly earnings release on November 7, 2023, and its Most Accurate Estimate comes in at $1.54 a share.
By taking the percentage difference between the $1.54 Most Accurate Estimate and the $1.51 Zacks Consensus Estimate, Devon Energy has an Earnings ESP of +2.19%. Investors should also know that DVN 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.
DVN is part of a big group of Oils and Energy stocks that boast a positive ESP, and investors may want to take a look at Diamondback Energy (FANG - Free Report) as well.
Diamondback Energy is a Zacks Rank #2 (Buy) stock, and is getting ready to report earnings on November 6, 2023. FANG's Most Accurate Estimate sits at $4.80 a share 25 days from its next earnings release.
The Zacks Consensus Estimate for Diamondback Energy is $4.72, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +1.67%.
DVN and FANG'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 >>