This is our short term rating system that serves as a timeliness indicator for stocks over the next 1 to 3 months. How good is it? See rankings and related performance below.
|Zacks Rank||Definition||Annualized Return|
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Market sentiment remains cautiously bullish with many of the big sell side firms still looking for a big correction. Goldman Sachs reiterated their bearish sentiments today, with an S&P 500 target of 1250 in 2012. With over 140 companies reporting results this week, we should begin to get a shape of the future of earnings fairly quickly. If we begin to see major downward revisions to FY2013 estimates, then one would expect commensurate corrections in the S&P 500 to account for those revisions.
There will be always be standouts in every earnings season and the goal of the Zacks ESP is to highlight those companies with an elevated chance of beating the expectations.
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 Consensus.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 (negative ESP).
Bullish ESP Stocks
Take Two Interactive ((TTWO - Snapshot Report))is a Zacks Rank 3 stock with a positive earnings ESP of 80% for the current quarter; the Zacks Consensus is for a loss of 20 cents in Q3 and a most accurate forecast of a loss of only 4 cents.On October 3rd, Piper Jaffray lifted its share target and noted several postives in the stock's fundamentals (TTWO is trading at only 6.8 times forward earnings). Analysts there are looking for TTWO to come in at the high end of revenue estimates. Their new game, “Enemy Unknown” just because available in the U.S.
It’s been a tough year for TTWO; shares tumbled more than 50% to a low of $7.40, but have since recovered just below the $11.00 level.
– Take Two Interactive reports earnings on October 24th
U.S. Steel ((X - Analyst Report))is a Zacks Rank 3 stock with a positive earnings ESP of 68.75% for the current quarter; the Zacks Consensus is for a profit of 2 cents in the third quarter.
Given the improvements we have seen in U.S. economic data, U.S. Steel may seen unexpected strength in the quarter. Shares are close to lows only seen in the 2009 crash and before in 2004.
– U.S. Steel reports earnings on October 23rd
USG Corporation ((USG - Snapshot Report))is a Zacks Rank 3 stock with a positive earnings ESP of 41.46% for the current quarter. The Zacks consensus estimate is for a Q3 loss of $0.11, with the most accurate estimate at -$0.06.
You might buy your home from Toll Brothers, Lennar or Ryland Homes, but many of the support and finishing materials used to build those homes most likely come from USG. Everything from drywall, joint compound and corner molding to backer boards for your tile and even roofing material are produced by USG.
New home sales have been steadily growing and the industry’s strength was confirmed by several home builders last quarter and confirmed by government sales data.
Given the trends, it could be a strong quarter for USG.
– USG Corp reports earnings on October 18th
Take Earnings a Step Further
If the ESP method sounds intriguing to you for improving your portfolio performance, you should check out Zacks Whisper Trader. Not only do I utilize Earnings ESP but I also factor in several critical data sets to create the “secret sauce” I use to achieve better than 80% accuracy in identifying positive earnings surprises… before they’re reported.
Senior Equities Strategist, Jared A 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.
Learn more aboutWhisper Tradernow
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