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Want Better Returns? Don?t Ignore These 2 Basic Materials Stocks Set to Beat Earnings
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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.
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.
The ability to identify stocks that are likely to top quarterly earnings expectations can be profitable, but it's no simple task. Here at Zacks, our Earnings ESP filter helps make things easier.
The Zacks Earnings ESP, Explained
The Zacks Earnings ESP, or Expected Surprise Prediction, aims to find earnings surprises by focusing on the most recent analyst revisions. The basic premise is that if an analyst reevaluates their earnings estimate ahead of an earnings release, it means they likely have new information that could possibly be more accurate.
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.
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.
Stocks with a #3 (Hold) ranking, which is most stocks covered at 60%, are expected to perform in-line with the broader market. But stocks that fall into the #2 (Buy) and #1 (Strong Buy) ranking, 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 CF Industries?
The final step today is to look at a stock that meets our ESP qualifications. CF Industries (CF - Free Report) earns a #2 (Buy) 16 days from its next quarterly earnings release on November 1, 2023, and its Most Accurate Estimate comes in at $0.98 a share.
CF Industries' Earnings ESP sits at +0.73%, which, as explained above, is calculated by taking the percentage difference between the $0.98 Most Accurate Estimate and the Zacks Consensus Estimate of $0.97. CF 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.
CF is one of just a large database of Basic Materials stocks with positive ESPs. Another solid-looking stock is Bunge (BG - Free Report) .
Bunge, which is readying to report earnings on October 26, 2023, sits at a Zacks Rank #3 (Hold) right now. It's Most Accurate Estimate is currently $2.30 a share, and BG is 10 days out from its next earnings report.
The Zacks Consensus Estimate for Bunge is $2.30, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +0.22%.
Because both stocks hold a positive Earnings ESP, CF and BG 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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Want Better Returns? Don?t Ignore These 2 Basic Materials Stocks Set to Beat Earnings
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.
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.
The ability to identify stocks that are likely to top quarterly earnings expectations can be profitable, but it's no simple task. Here at Zacks, our Earnings ESP filter helps make things easier.
The Zacks Earnings ESP, Explained
The Zacks Earnings ESP, or Expected Surprise Prediction, aims to find earnings surprises by focusing on the most recent analyst revisions. The basic premise is that if an analyst reevaluates their earnings estimate ahead of an earnings release, it means they likely have new information that could possibly be more accurate.
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.
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.
Stocks with a #3 (Hold) ranking, which is most stocks covered at 60%, are expected to perform in-line with the broader market. But stocks that fall into the #2 (Buy) and #1 (Strong Buy) ranking, 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 CF Industries?
The final step today is to look at a stock that meets our ESP qualifications. CF Industries (CF - Free Report) earns a #2 (Buy) 16 days from its next quarterly earnings release on November 1, 2023, and its Most Accurate Estimate comes in at $0.98 a share.
CF Industries' Earnings ESP sits at +0.73%, which, as explained above, is calculated by taking the percentage difference between the $0.98 Most Accurate Estimate and the Zacks Consensus Estimate of $0.97. CF 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.
CF is one of just a large database of Basic Materials stocks with positive ESPs. Another solid-looking stock is Bunge (BG - Free Report) .
Bunge, which is readying to report earnings on October 26, 2023, sits at a Zacks Rank #3 (Hold) right now. It's Most Accurate Estimate is currently $2.30 a share, and BG is 10 days out from its next earnings report.
The Zacks Consensus Estimate for Bunge is $2.30, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +0.22%.
Because both stocks hold a positive Earnings ESP, CF and BG 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 >>