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How to Find Strong Finance Stocks Slated for Positive Earnings Surprises
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Earnings are arguably the most important single number on a company's quarterly financial report. Wall Street clearly dives into all of the other metrics and management's input, but the EPS figure helps cut through all the noise.
We know earnings results are vital, but how a company performs compared to bottom line expectations can be even more important when it comes to stock prices, especially in the near-term. This means that investors might want to take advantage of these 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.
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 ranking of #3 (Hold), or 60% of all stocks covered by the Zacks Rank, are expected to perform in-line with the broader market. Stocks with rankings of #2 (Buy) and #1 (Strong Buy), 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 Ally Financial?
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. Ally Financial (ALLY - Free Report) earns a #3 (Hold) right now and its Most Accurate Estimate sits at $0.63 a share, just eight days from its upcoming earnings release on July 17, 2024.
By taking the percentage difference between the $0.63 Most Accurate Estimate and the $0.61 Zacks Consensus Estimate, Ally Financial has an Earnings ESP of +2.99%. Investors should also know that ALLY is one of a large group 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.
ALLY is just one of a large group of Finance stocks with a positive ESP figure. Capital One (COF - Free Report) is another qualifying stock you may want to consider.
Slated to report earnings on July 23, 2024, Capital One holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is $3.37 a share 14 days from its next quarterly update.
Capital One's Earnings ESP figure currently stands at +3.9% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $3.24.
ALLY and COF's 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
Earnings are arguably the most important single number on a company's quarterly financial report. Wall Street clearly dives into all of the other metrics and management's input, but the EPS figure helps cut through all the noise.
We know earnings results are vital, but how a company performs compared to bottom line expectations can be even more important when it comes to stock prices, especially in the near-term. This means that investors might want to take advantage of these 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.
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 ranking of #3 (Hold), or 60% of all stocks covered by the Zacks Rank, are expected to perform in-line with the broader market. Stocks with rankings of #2 (Buy) and #1 (Strong Buy), 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 Ally Financial?
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. Ally Financial (ALLY - Free Report) earns a #3 (Hold) right now and its Most Accurate Estimate sits at $0.63 a share, just eight days from its upcoming earnings release on July 17, 2024.
By taking the percentage difference between the $0.63 Most Accurate Estimate and the $0.61 Zacks Consensus Estimate, Ally Financial has an Earnings ESP of +2.99%. Investors should also know that ALLY is one of a large group 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.
ALLY is just one of a large group of Finance stocks with a positive ESP figure. Capital One (COF - Free Report) is another qualifying stock you may want to consider.
Slated to report earnings on July 23, 2024, Capital One holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is $3.37 a share 14 days from its next quarterly update.
Capital One's Earnings ESP figure currently stands at +3.9% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $3.24.
ALLY and COF's 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 >>