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These 2 Industrial Products Stocks Could Beat Earnings: Why They Should Be on Your Radar

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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.

The earnings figure itself is key, of course, but a beat or miss on the bottom line can sometimes be just as, if not more, important. Therefore, investors should consider paying close attention to these earnings surprises, as a big beat can help a stock climb and vice versa.

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 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.

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.

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.

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 Caterpillar?

The final step today is to look at a stock that meets our ESP qualifications. Caterpillar (CAT - Free Report) earns a #3 (Hold) 28 days from its next quarterly earnings release on August 6, 2024, and its Most Accurate Estimate comes in at $5.81 a share.

CAT has an Earnings ESP figure of +3.98%, which, as explained above, is calculated by taking the percentage difference between the $5.81 Most Accurate Estimate and the Zacks Consensus Estimate of $5.58. Caterpillar 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.

CAT is one of just a large database of Industrial Products stocks with positive ESPs. Another solid-looking stock is Johnson Controls (JCI - Free Report) .

Johnson Controls is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on August 7, 2024. JCI's Most Accurate Estimate sits at $1.10 a share 29 days from its next earnings release.

Johnson Controls' Earnings ESP figure currently stands at +1.55% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $1.08.

CAT and JCI'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 >>


See More Zacks Research for These Tickers


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Caterpillar Inc. (CAT) - free report >>

Johnson Controls International plc (JCI) - free report >>

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