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How to Boost Your Portfolio with Top Medical Stocks Set to Beat Earnings

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Two factors often determine stock prices in the long run: earnings and interest rates. Investors can't control the latter, but they can focus on a company's earnings results every quarter.

We know earnings results are vital, but how a company performs compared to bottom line expectations can be even more important when it comes to stock prices, especially in the near-term. This means that investors might want to take advantage of these earnings surprises.

Hunting for 'earnings whispers' or companies poised to beat their quarterly earnings estimates is a somewhat common practice. But that doesn't make it easy. One way that has been proven to work is by using the Zacks Earnings ESP tool.

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.

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.

In fact, when we combined a Zacks Rank #3 (Hold) or better and a positive Earnings ESP, stocks produced a positive surprise 70% of the time. Perhaps most importantly, using these parameters has helped produce 28.3% annual returns on average, according to our 10 year backtest.

Most stocks, about 60%, fall into the #3 (Hold) category, and they are expected to perform in-line with the broader market. Stocks with a #2 (Buy) and #1 (Strong Buy) rating, or the top 15% and top 5% of stocks, respectively, should outperform the market, with Strong Buy stocks outperforming more than any other rank.

Should You Consider Patterson Cos.

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. Patterson Cos. (PDCO - Free Report) earns a #2 (Buy) right now and its Most Accurate Estimate sits at $0.42 a share, just two days from its upcoming earnings release on August 30, 2023.

By taking the percentage difference between the $0.42 Most Accurate Estimate and the $0.40 Zacks Consensus Estimate, Patterson Cos. has an Earnings ESP of +5.66%. Investors should also know that PDCO 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.

PDCO is part of a big group of Medical stocks that boast a positive ESP, and investors may want to take a look at Centene (CNC - Free Report) as well.

Slated to report earnings on October 24, 2023, Centene holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is $1.39 a share 57 days from its next quarterly update.

The Zacks Consensus Estimate for Centene is $1.38, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +0.15%.

PDCO and CNC'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 >>


See More Zacks Research for These Tickers


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Patterson Companies, Inc. (PDCO) - free report >>

Centene Corporation (CNC) - free report >>

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