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How to Find Strong Utilities Stocks Slated for Positive Earnings Surprises
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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.
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.
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 Expected Surprise Prediction, or ESP, works by locking in on the most up-to-date analyst earnings revisions because they can be more accurate than estimates from weeks or even months before the actual release date. The thinking is pretty straightforward: analysts who provide earnings estimates closer to the report are likely to have more information.
Now that we understand the basic idea, let's look at how the Expected Surprise Prediction works. The ESP is calculated by comparing the Most Accurate Estimate to the Zacks Consensus Estimate, with the percentage difference between the two giving us the Zacks ESP figure.
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 #3 (Hold) ranking, which is most stocks covered at 60%, are expected to perform in-line with the broader market. But stocks that fall into the #2 (Buy) and #1 (Strong Buy) ranking, 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 American Electric Power?
The final step today is to look at a stock that meets our ESP qualifications. American Electric Power (AEP - Free Report) earns a #3 (Hold) four days from its next quarterly earnings release on February 27, 2024, and its Most Accurate Estimate comes in at $1.28 a share.
AEP has an Earnings ESP figure of +0.79%, which, as explained above, is calculated by taking the percentage difference between the $1.28 Most Accurate Estimate and the Zacks Consensus Estimate of $1.27. American Electric Power is one of a large database 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.
AEP is just one of a large group of Utilities stocks with a positive ESP figure. Consolidated Edison (ED - Free Report) is another qualifying stock you may want to consider.
Consolidated Edison, which is readying to report earnings on May 2, 2024, sits at a Zacks Rank #3 (Hold) right now. It's Most Accurate Estimate is currently $2.01 a share, and ED is 69 days out from its next earnings report.
Consolidated Edison's Earnings ESP figure currently stands at +4.51% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $1.92.
Because both stocks hold a positive Earnings ESP, AEP and ED could potentially post earnings beats in their next reports.
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 >>
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How to Find Strong Utilities Stocks Slated for Positive Earnings Surprises
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.
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.
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 Expected Surprise Prediction, or ESP, works by locking in on the most up-to-date analyst earnings revisions because they can be more accurate than estimates from weeks or even months before the actual release date. The thinking is pretty straightforward: analysts who provide earnings estimates closer to the report are likely to have more information.
Now that we understand the basic idea, let's look at how the Expected Surprise Prediction works. The ESP is calculated by comparing the Most Accurate Estimate to the Zacks Consensus Estimate, with the percentage difference between the two giving us the Zacks ESP figure.
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 #3 (Hold) ranking, which is most stocks covered at 60%, are expected to perform in-line with the broader market. But stocks that fall into the #2 (Buy) and #1 (Strong Buy) ranking, 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 American Electric Power?
The final step today is to look at a stock that meets our ESP qualifications. American Electric Power (AEP - Free Report) earns a #3 (Hold) four days from its next quarterly earnings release on February 27, 2024, and its Most Accurate Estimate comes in at $1.28 a share.
AEP has an Earnings ESP figure of +0.79%, which, as explained above, is calculated by taking the percentage difference between the $1.28 Most Accurate Estimate and the Zacks Consensus Estimate of $1.27. American Electric Power is one of a large database 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.
AEP is just one of a large group of Utilities stocks with a positive ESP figure. Consolidated Edison (ED - Free Report) is another qualifying stock you may want to consider.
Consolidated Edison, which is readying to report earnings on May 2, 2024, sits at a Zacks Rank #3 (Hold) right now. It's Most Accurate Estimate is currently $2.01 a share, and ED is 69 days out from its next earnings report.
Consolidated Edison's Earnings ESP figure currently stands at +4.51% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $1.92.
Because both stocks hold a positive Earnings ESP, AEP and ED could potentially post earnings beats in their next reports.
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 >>