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.
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.
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 Epam?
The final step today is to look at a stock that meets our ESP qualifications. Epam (EPAM - Free Report) earns a #3 (Hold) 29 days from its next quarterly earnings release on November 3, 2022, and its Most Accurate Estimate comes in at $2.56 a share.
By taking the percentage difference between the $2.56 Most Accurate Estimate and the $2.52 Zacks Consensus Estimate, Epam has an Earnings ESP of +1.59%. Investors should also know that EPAM 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.
EPAM is one of just a large database of Computer and Technology stocks with positive ESPs. Another solid-looking stock is Skyworks Solutions (SWKS - Free Report) .
Slated to report earnings on November 3, 2022, Skyworks Solutions holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is $2.91 a share 29 days from its next quarterly update.
The Zacks Consensus Estimate for Skyworks Solutions is $2.91, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +0.11%.
Because both stocks hold a positive Earnings ESP, EPAM and SWKS 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 >>
Where Will Stocks Go…
If Biden Wins? If Trump Wins?
The answers may surprise you.
Since 1950, even after negative midterm years, the market has never had a lower presidential election year. With voters energized and engaged, the market has been almost unrelentingly bullish no matter which party wins!
Now is the time to download Zacks' free Special Report with 5 stocks that offer extreme upside for both Democrats and Republicans…
1. Medical manufacturer has gained +11,000% in the last 15 years.
2. Rental company is absolutely crushing its sector.
3. Energy powerhouse plans to grow its already large dividend by 25%.
4. Aerospace and defense standout just landed a potentially $80 billion contract.
5. Giant Chipmaker is building huge plants in the U.S.
Hurry, Download Special Report FREE >>
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.
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.
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 Epam?
The final step today is to look at a stock that meets our ESP qualifications. Epam (EPAM - Free Report) earns a #3 (Hold) 29 days from its next quarterly earnings release on November 3, 2022, and its Most Accurate Estimate comes in at $2.56 a share.
By taking the percentage difference between the $2.56 Most Accurate Estimate and the $2.52 Zacks Consensus Estimate, Epam has an Earnings ESP of +1.59%. Investors should also know that EPAM 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.
EPAM is one of just a large database of Computer and Technology stocks with positive ESPs. Another solid-looking stock is Skyworks Solutions (SWKS - Free Report) .
Slated to report earnings on November 3, 2022, Skyworks Solutions holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is $2.91 a share 29 days from its next quarterly update.
The Zacks Consensus Estimate for Skyworks Solutions is $2.91, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +0.11%.
Because both stocks hold a positive Earnings ESP, EPAM and SWKS 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 >>
Where Will Stocks Go…
If Biden Wins? If Trump Wins?
The answers may surprise you.
Since 1950, even after negative midterm years, the market has never had a lower presidential election year. With voters energized and engaged, the market has been almost unrelentingly bullish no matter which party wins!
Now is the time to download Zacks' free Special Report with 5 stocks that offer extreme upside for both Democrats and Republicans…
1. Medical manufacturer has gained +11,000% in the last 15 years.
2. Rental company is absolutely crushing its sector.
3. Energy powerhouse plans to grow its already large dividend by 25%.
4. Aerospace and defense standout just landed a potentially $80 billion contract.
5. Giant Chipmaker is building huge plants in the U.S.
Hurry, Download Special Report FREE >>
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