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These 2 Finance 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, 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.
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.
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 #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 Allstate?
The final step today is to look at a stock that meets our ESP qualifications. Allstate (ALL - Free Report) earns a #3 (Hold) seven days from its next quarterly earnings release on July 31, 2024, and its Most Accurate Estimate comes in at $0.46 a share.
By taking the percentage difference between the $0.46 Most Accurate Estimate and the $0.33 Zacks Consensus Estimate, Allstate has an Earnings ESP of +36.5%. Investors should also know that ALL 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.
ALL is just one of a large group of Finance stocks with a positive ESP figure. Ally Financial (ALLY - Free Report) is another qualifying stock you may want to consider.
Ally Financial, which is readying to report earnings on October 16, 2024, sits at a Zacks Rank #2 (Buy) right now. It's Most Accurate Estimate is currently $0.98 a share, and ALLY is 84 days out from its next earnings report.
The Zacks Consensus Estimate for Ally Financial is $0.96, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +2.11%.
ALL and ALLY'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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These 2 Finance Stocks Could Beat Earnings: Why They Should Be on Your Radar
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, 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.
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.
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 #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 Allstate?
The final step today is to look at a stock that meets our ESP qualifications. Allstate (ALL - Free Report) earns a #3 (Hold) seven days from its next quarterly earnings release on July 31, 2024, and its Most Accurate Estimate comes in at $0.46 a share.
By taking the percentage difference between the $0.46 Most Accurate Estimate and the $0.33 Zacks Consensus Estimate, Allstate has an Earnings ESP of +36.5%. Investors should also know that ALL 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.
ALL is just one of a large group of Finance stocks with a positive ESP figure. Ally Financial (ALLY - Free Report) is another qualifying stock you may want to consider.
Ally Financial, which is readying to report earnings on October 16, 2024, sits at a Zacks Rank #2 (Buy) right now. It's Most Accurate Estimate is currently $0.98 a share, and ALLY is 84 days out from its next earnings report.
The Zacks Consensus Estimate for Ally Financial is $0.96, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +2.11%.
ALL and ALLY'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 >>