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How to Find Strong Basic Materials Stocks Slated for Positive Earnings Surprises
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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, 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 Nutrien?
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. Nutrien (NTR - Free Report) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at $2.17 a share 30 days away from its upcoming earnings release on August 7, 2024.
Nutrien's Earnings ESP sits at +1.88%, which, as explained above, is calculated by taking the percentage difference between the $2.17 Most Accurate Estimate and the Zacks Consensus Estimate of $2.13. NTR 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.
NTR is part of a big group of Basic Materials stocks that boast a positive ESP, and investors may want to take a look at Kinross Gold (KGC - Free Report) as well.
Kinross Gold, which is readying to report earnings on July 31, 2024, sits at a Zacks Rank #2 (Buy) right now. It's Most Accurate Estimate is currently $0.15 a share, and KGC is 23 days out from its next earnings report.
For Kinross Gold, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $0.12 is +27.66%.
Because both stocks hold a positive Earnings ESP, NTR and KGC 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 Basic Materials Stocks Slated for Positive Earnings Surprises
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, 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 Nutrien?
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. Nutrien (NTR - Free Report) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at $2.17 a share 30 days away from its upcoming earnings release on August 7, 2024.
Nutrien's Earnings ESP sits at +1.88%, which, as explained above, is calculated by taking the percentage difference between the $2.17 Most Accurate Estimate and the Zacks Consensus Estimate of $2.13. NTR 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.
NTR is part of a big group of Basic Materials stocks that boast a positive ESP, and investors may want to take a look at Kinross Gold (KGC - Free Report) as well.
Kinross Gold, which is readying to report earnings on July 31, 2024, sits at a Zacks Rank #2 (Buy) right now. It's Most Accurate Estimate is currently $0.15 a share, and KGC is 23 days out from its next earnings report.
For Kinross Gold, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $0.12 is +27.66%.
Because both stocks hold a positive Earnings ESP, NTR and KGC 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 >>