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These 2 Basic Materials Stocks Could Beat Earnings: Why They Should Be on Your Radar
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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.
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 is more formally known as the Expected Surprise Prediction, and it aims to grab the inside track on the latest analyst estimate revisions ahead of a company's report. The idea is relatively intuitive as a newer projection might be based on more complete information.
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.
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.
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 Carpenter Technology?
The last thing we will do today, now that we have a grasp on the ESP and how powerful of a tool it can be, is to quickly look at a qualifying stock. Carpenter Technology (CRS - Free Report) holds a #1 (Strong Buy) at the moment and its Most Accurate Estimate comes in at $1.52 a share 28 days away from its upcoming earnings release on July 25, 2024.
Carpenter Technology's Earnings ESP sits at +6.45%, which, as explained above, is calculated by taking the percentage difference between the $1.52 Most Accurate Estimate and the Zacks Consensus Estimate of $1.43. CRS 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.
CRS is one of just a large database of Basic Materials stocks with positive ESPs. Another solid-looking stock is Pan American Silver (PAAS - Free Report) .
Pan American Silver, which is readying to report earnings on August 14, 2024, sits at a Zacks Rank #3 (Hold) right now. It's Most Accurate Estimate is currently $0.13 a share, and PAAS is 48 days out from its next earnings report.
The Zacks Consensus Estimate for Pan American Silver is $0.08, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +60.71%.
Because both stocks hold a positive Earnings ESP, CRS and PAAS 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 >>
Image: Bigstock
These 2 Basic Materials Stocks Could Beat Earnings: Why They Should Be on Your Radar
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.
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 is more formally known as the Expected Surprise Prediction, and it aims to grab the inside track on the latest analyst estimate revisions ahead of a company's report. The idea is relatively intuitive as a newer projection might be based on more complete information.
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.
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.
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 Carpenter Technology?
The last thing we will do today, now that we have a grasp on the ESP and how powerful of a tool it can be, is to quickly look at a qualifying stock. Carpenter Technology (CRS - Free Report) holds a #1 (Strong Buy) at the moment and its Most Accurate Estimate comes in at $1.52 a share 28 days away from its upcoming earnings release on July 25, 2024.
Carpenter Technology's Earnings ESP sits at +6.45%, which, as explained above, is calculated by taking the percentage difference between the $1.52 Most Accurate Estimate and the Zacks Consensus Estimate of $1.43. CRS 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.
CRS is one of just a large database of Basic Materials stocks with positive ESPs. Another solid-looking stock is Pan American Silver (PAAS - Free Report) .
Pan American Silver, which is readying to report earnings on August 14, 2024, sits at a Zacks Rank #3 (Hold) right now. It's Most Accurate Estimate is currently $0.13 a share, and PAAS is 48 days out from its next earnings report.
The Zacks Consensus Estimate for Pan American Silver is $0.08, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +60.71%.
Because both stocks hold a positive Earnings ESP, CRS and PAAS 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 >>