Back to top

Image: Bigstock

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

Read MoreHide Full Article

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.

Life and the stock market are both about expectations, and rising above what is expected is often rewarded, while falling short can come with negative consequences. Investors might want to try to capture stronger returns by finding positive 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.

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.

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 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 Trane Technologies?

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. Trane Technologies (TT - Free Report) holds a #2 (Buy) at the moment and its Most Accurate Estimate comes in at $3.11 a share five days away from its upcoming earnings release on July 31, 2024.

By taking the percentage difference between the $3.11 Most Accurate Estimate and the $3.08 Zacks Consensus Estimate, Trane Technologies has an Earnings ESP of +0.95%. Investors should also know that TT 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.

TT is part of a big group of Business Services stocks that boast a positive ESP, and investors may want to take a look at SPX Technologies (SPXC - Free Report) as well.

Slated to report earnings on August 1, 2024, SPX Technologies holds a #2 (Buy) ranking on the Zacks Rank, and it's Most Accurate Estimate is $1.28 a share six days from its next quarterly update.

For SPX Technologies, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $1.26 is +1.59%.

TT and SPXC'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 >>


See More Zacks Research for These Tickers


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


Trane Technologies plc (TT) - free report >>

SPX Technologies, Inc. (SPXC) - free report >>

Published in