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How to Boost Your Portfolio with Top Industrial Products Stocks Set to Beat Earnings

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Wall Street watches a company's quarterly report closely to understand as much as possible about its recent performance and what to expect going forward. Of course, one figure often stands out among the rest: earnings.

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.

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 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.

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.

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 Stanley Black & Decker?

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. Stanley Black & Decker (SWK - Free Report) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at $0.75 a share 21 days away from its upcoming earnings release on February 1, 2024.

By taking the percentage difference between the $0.75 Most Accurate Estimate and the $0.73 Zacks Consensus Estimate, Stanley Black & Decker has an Earnings ESP of +2.54%. Investors should also know that SWK 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.

SWK is one of just a large database of Industrial Products stocks with positive ESPs. Another solid-looking stock is Parker-Hannifin (PH - Free Report) .

Parker-Hannifin, which is readying to report earnings on February 1, 2024, sits at a Zacks Rank #2 (Buy) right now. It's Most Accurate Estimate is currently $5.27 a share, and PH is 21 days out from its next earnings report.

The Zacks Consensus Estimate for Parker-Hannifin is $5.24, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +0.52%.

SWK and PH'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


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Stanley Black & Decker, Inc. (SWK) - free report >>

Parker-Hannifin Corporation (PH) - free report >>

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