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week of earnings season continues to give me mixed emotions. On one hand you have cautious outlooks coming
from about 60% of companies and yet on the other there are some strong relative
numbers sending stocks mostly higher. These
conflicting messages can make trading extremely difficult.
It’s not just about the “number”
bellwether Intel downgraded its growth outlook for the remainder of the year
and AMD was a train wreck, but yet bank earnings have been relatively strong,
with Bank of America, Goldman Sachs and J.P. Morgan all beating estimates. Even IBM and eBay beat estimates.
Director Sheraz Mian noted that total earnings for the 52 companies that have
reported results as of Wednesday morning were down 2.3% from the same period
line is that companies are making LESS money, but stocks have been climbing
over the past week; further proving that expectation
is really the key to finding a stock that not only surprises, but rallies. If a company under-promises and
over-delivers, you have a recipe for a rally, even if they are making less than
they did a year ago.
The secret to
targeting the best companies is to not only find the candidates that are
under-promising, but those that are most likely to over-deliver. Analysts can help us identify these targets
and the Zacks ESP reading is the perfect place to start.
About Zacks Earnings ESP
is Zacks’ proprietary methodology for determining which stocks have the best
chance to surprise with their next earnings announcement. The Earnings ESP
shows the percentage difference between the Most Accurate Estimate and the
The Zacks ESP
helps predict earnings surprises to the upside and downside; the greater the
ESP (positive or negative) the greater the likelihood for a surprise.
I use ESP to
help quantify the conviction of the analysts for a surprise and stack the odds
in my favor when I combine it with other measurements and statistics.
This can work
for bullish potential surprises (positive ESP) as well as bearish surprises
out a few bullish ESP candidates that report over the next week or so:
Bullish ESP Stocks
(ZIP) is a Zacks Rank 3 stock with an earnings ESP of 200%. The Zacks consensus estimate is for 1.00,
with the most accurate estimate at $2.00.
They have managed to exceed analysts’ expectations by an average of 29%
over the past four quarters.
Zipcar is the
largest car sharing company in the world and recently expanded operations into China. They are growing in dense urban areas and
around colleges where demand is high.
report earnings on July 16th AMC (after market close)
Read Analyst Details Here
Capital City Bank (CCBG - Snapshot Report) is
a Zacks Rank 2 stock with an earnings ESP
of 190%. The Zacks consensus
estimate is for 1.90, with the most accurate estimate at $3.61. Captial City has exceeded analysts’
expectations by an average of 14% over the past four quarters.
is a financial holding company engaged in the commercial and retail banking
business, including accepting demand, savings and time deposits; extending
credit; originating residential mortgage loans; and providing data processing
services, asset management services, trust services, retail brokerage services
and a broad range of other financial services to corporate and individual
customers, governmental entities and correspondent banks.
City Bank report earnings on July 18th BMO (before market open).
Read Analyst Details Here
KKR & Co. L.P. (KKR - Snapshot Report) is a Zacks Rank 2 stock with an
earnings ESP of 50%. The Zacks consensus
estimate is for Q2 EPS of $0.12, with the most accurate estimate at $0.18. KKR actually missed estimates 3 of the last
four reports, but managed a 43% upside surprise last quarter.
to me that estimates are generally lower than they were 90 days ago and yet the
stock is basically flat in that same time frame. This tells me that there are
higher expectations for the stock and it may need to beat just to stay flat.
Kravis Roberts & Co. provides a range of asset management services to its
investors and provides capital markets services to its firm, its portfolio
companies and its clients. The Company operates private equity funds that take
either controlling or strategic minority ownership positions for long-term
appreciation; invests in leveraged loans, high-yield bonds and less liquid
credit products; and, on behalf of portfolio companies, arranges equity and
debt financing and offers capital market advice.
– KKR &
Co reports earnings on July 27th BMO.
Read Analyst Details Here
If this method
sounds intriguing to you for improving your portfolios, consider Zacks
Whisper Trader. Not
only do I use Earnings ESP but I also include some other critical factors to
create the “secret sauce” I use to achieve 77.96% accuracy in identifying
positive earnings surprises … before they’re reported.
about Whisper Trader
Senior Equities Strategist, Jared
Levy, is the editor of Whisper
Trader and can show you how to use the power
of Zacks Earnings ESP and earnings surprises for timely, steady gains.