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

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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.

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.

Now that we know how important earnings and earnings surprises are, it's time to show investors how to take advantage of these events to boost their returns by utilizing the Zacks Earnings ESP filter.

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.

The core of the ESP model is comparing the Most Accurate Estimate to the Zacks Consensus Estimate, where the resulting percentage difference between the two equals the Expected Surprise Prediction. The Zacks Rank is also factored into the ESP metric to better help find companies that appear poised to top their next bottom-line consensus estimate, which will hopefully help lift the stock price.

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 Embraer?

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. Embraer (ERJ - Free Report) earns a #3 (Hold) right now and its Most Accurate Estimate sits at $0.21 a share, just 26 days from its upcoming earnings release on August 12, 2024.

ERJ has an Earnings ESP figure of +6.78%, which, as explained above, is calculated by taking the percentage difference between the $0.21 Most Accurate Estimate and the Zacks Consensus Estimate of $0.20. Embraer 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.

ERJ is one of just a large database of Aerospace stocks with positive ESPs. Another solid-looking stock is Leidos (LDOS - Free Report) .

Leidos, which is readying to report earnings on July 30, 2024, sits at a Zacks Rank #3 (Hold) right now. It's Most Accurate Estimate is currently $2.29 a share, and LDOS is 13 days out from its next earnings report.

For Leidos, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $2.26 is +1.33%.

Because both stocks hold a positive Earnings ESP, ERJ and LDOS 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 >>


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


Embraer-Empresa Brasileira de Aeronautica (ERJ) - free report >>

Leidos Holdings, Inc. (LDOS) - free report >>

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