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How to Find Strong Industrial Products 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.
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 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.
Now that we understand the basic idea, let's look at how the Expected Surprise Prediction works. The ESP is calculated by comparing the Most Accurate Estimate to the Zacks Consensus Estimate, with the percentage difference between the two giving us the Zacks ESP figure.
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 #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 Emerson Electric?
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. Emerson Electric (EMR - Free Report) earns a #3 (Hold) right now and its Most Accurate Estimate sits at $1.28 a share, just 16 days from its upcoming earnings release on May 8, 2024.
Emerson Electric's Earnings ESP sits at +1.87%, which, as explained above, is calculated by taking the percentage difference between the $1.28 Most Accurate Estimate and the Zacks Consensus Estimate of $1.25. EMR 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.
EMR is part of a big group of Industrial Products stocks that boast a positive ESP, and investors may want to take a look at Caterpillar (CAT - Free Report) as well.
Caterpillar, which is readying to report earnings on April 25, 2024, sits at a Zacks Rank #3 (Hold) right now. It's Most Accurate Estimate is currently $5.15 a share, and CAT is three days out from its next earnings report.
Caterpillar's Earnings ESP figure currently stands at +0.32% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $5.14.
Because both stocks hold a positive Earnings ESP, EMR and CAT 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 Industrial Products 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.
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 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.
Now that we understand the basic idea, let's look at how the Expected Surprise Prediction works. The ESP is calculated by comparing the Most Accurate Estimate to the Zacks Consensus Estimate, with the percentage difference between the two giving us the Zacks ESP figure.
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 #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 Emerson Electric?
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. Emerson Electric (EMR - Free Report) earns a #3 (Hold) right now and its Most Accurate Estimate sits at $1.28 a share, just 16 days from its upcoming earnings release on May 8, 2024.
Emerson Electric's Earnings ESP sits at +1.87%, which, as explained above, is calculated by taking the percentage difference between the $1.28 Most Accurate Estimate and the Zacks Consensus Estimate of $1.25. EMR 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.
EMR is part of a big group of Industrial Products stocks that boast a positive ESP, and investors may want to take a look at Caterpillar (CAT - Free Report) as well.
Caterpillar, which is readying to report earnings on April 25, 2024, sits at a Zacks Rank #3 (Hold) right now. It's Most Accurate Estimate is currently $5.15 a share, and CAT is three days out from its next earnings report.
Caterpillar's Earnings ESP figure currently stands at +0.32% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $5.14.
Because both stocks hold a positive Earnings ESP, EMR and CAT 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 >>