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Why Investors Need to Take Advantage of These 2 Medical Stocks Now
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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.
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.
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 Expected Surprise Prediction, or ESP, works by locking in on the most up-to-date analyst earnings revisions because they can be more accurate than estimates from weeks or even months before the actual release date. The thinking is pretty straightforward: analysts who provide earnings estimates closer to the report are likely to have more 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.
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 Eli Lilly?
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. Eli Lilly (LLY - Free Report) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at $2.82 a share 28 days away from its upcoming earnings release on August 8, 2024.
By taking the percentage difference between the $2.82 Most Accurate Estimate and the $2.65 Zacks Consensus Estimate, Eli Lilly has an Earnings ESP of +6.49%. Investors should also know that LLY 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.
LLY is part of a big group of Medical stocks that boast a positive ESP, and investors may want to take a look at HCA Healthcare (HCA - Free Report) as well.
Slated to report earnings on July 23, 2024, HCA Healthcare holds a #2 (Buy) ranking on the Zacks Rank, and it's Most Accurate Estimate is $5.32 a share 12 days from its next quarterly update.
The Zacks Consensus Estimate for HCA Healthcare is $4.97, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +7.1%.
LLY and HCA's positive ESP figures tell us that both stocks have a good chance at beating analyst expectations in their next earnings report.
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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Why Investors Need to Take Advantage of These 2 Medical Stocks Now
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.
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.
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 Expected Surprise Prediction, or ESP, works by locking in on the most up-to-date analyst earnings revisions because they can be more accurate than estimates from weeks or even months before the actual release date. The thinking is pretty straightforward: analysts who provide earnings estimates closer to the report are likely to have more 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.
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 Eli Lilly?
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. Eli Lilly (LLY - Free Report) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at $2.82 a share 28 days away from its upcoming earnings release on August 8, 2024.
By taking the percentage difference between the $2.82 Most Accurate Estimate and the $2.65 Zacks Consensus Estimate, Eli Lilly has an Earnings ESP of +6.49%. Investors should also know that LLY 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.
LLY is part of a big group of Medical stocks that boast a positive ESP, and investors may want to take a look at HCA Healthcare (HCA - Free Report) as well.
Slated to report earnings on July 23, 2024, HCA Healthcare holds a #2 (Buy) ranking on the Zacks Rank, and it's Most Accurate Estimate is $5.32 a share 12 days from its next quarterly update.
The Zacks Consensus Estimate for HCA Healthcare is $4.97, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +7.1%.
LLY and HCA's positive ESP figures tell us that both stocks have a good chance at beating analyst expectations in their next earnings report.
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 >>