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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.
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.
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 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.
With this in mind, the Expected Surprise Prediction compares the Most Accurate Estimate (being the most recent) against the overall Zacks Consensus Estimate. The percentage difference provides the ESP figure. The system also utilizes our core Zacks Rank to provide a stronger system for identifying stocks that might beat their next quarterly earnings estimate and possibly see the stock price climb.
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.
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 CME Group?
The final step today is to look at a stock that meets our ESP qualifications. CME Group (CME - Free Report) earns a #3 (Hold) 29 days from its next quarterly earnings release on July 24, 2024, and its Most Accurate Estimate comes in at $2.54 a share.
CME has an Earnings ESP figure of +1.81%, which, as explained above, is calculated by taking the percentage difference between the $2.54 Most Accurate Estimate and the Zacks Consensus Estimate of $2.49. CME Group is one of a large database 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.
CME is part of a big group of Finance stocks that boast a positive ESP, and investors may want to take a look at Ares Management (ARES - Free Report) as well.
Ares Management is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on August 6, 2024. ARES' Most Accurate Estimate sits at $0.99 a share 42 days from its next earnings release.
The Zacks Consensus Estimate for Ares Management is $0.98, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +0.34%.
CME and ARES' positive ESP metrics may signal that a positive earnings surprise for both stocks is on the horizon.
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.
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.
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 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.
With this in mind, the Expected Surprise Prediction compares the Most Accurate Estimate (being the most recent) against the overall Zacks Consensus Estimate. The percentage difference provides the ESP figure. The system also utilizes our core Zacks Rank to provide a stronger system for identifying stocks that might beat their next quarterly earnings estimate and possibly see the stock price climb.
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.
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 CME Group?
The final step today is to look at a stock that meets our ESP qualifications. CME Group (CME - Free Report) earns a #3 (Hold) 29 days from its next quarterly earnings release on July 24, 2024, and its Most Accurate Estimate comes in at $2.54 a share.
CME has an Earnings ESP figure of +1.81%, which, as explained above, is calculated by taking the percentage difference between the $2.54 Most Accurate Estimate and the Zacks Consensus Estimate of $2.49. CME Group is one of a large database 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.
CME is part of a big group of Finance stocks that boast a positive ESP, and investors may want to take a look at Ares Management (ARES - Free Report) as well.
Ares Management is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on August 6, 2024. ARES' Most Accurate Estimate sits at $0.99 a share 42 days from its next earnings release.
The Zacks Consensus Estimate for Ares Management is $0.98, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +0.34%.
CME and ARES' positive ESP metrics may signal that a positive earnings surprise for both stocks is on the horizon.
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 >>