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.
Now that we know how important earnings and earnings surprises are, it's time to show investors how to take advantage of these events to boost their returns by utilizing the Zacks Earnings ESP filter.
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.
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.
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 Nike?
The final step today is to look at a stock that meets our ESP qualifications. Nike (NKE - Free Report) earns a #3 (Hold) five days from its next quarterly earnings release on December 20, 2022, and its Most Accurate Estimate comes in at $0.66 a share.
Nike's Earnings ESP sits at +1.09%, which, as explained above, is calculated by taking the percentage difference between the $0.66 Most Accurate Estimate and the Zacks Consensus Estimate of $0.65. NKE is also part of a large group of stocks that boast a positive ESP. Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they've reported.
NKE is part of a big group of Consumer Discretionary stocks that boast a positive ESP, and investors may want to take a look at Caesars Entertainment (CZR - Free Report) as well.
Slated to report earnings on February 28, 2023, Caesars Entertainment holds a #2 (Buy) ranking on the Zacks Rank, and it's Most Accurate Estimate is $0.15 a share 75 days from its next quarterly update.
The Zacks Consensus Estimate for Caesars Entertainment is $0.13, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +19.32%.
Because both stocks hold a positive Earnings ESP, NKE and CZR 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 >>
7 Best Stocks for the Next 30 Days
Just released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."
Since 1988, the full list has beaten the market more than 2X over with an average gain of +24.2% per year. So be sure to give these hand picked 7 your immediate attention.
See them now >>
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.
Now that we know how important earnings and earnings surprises are, it's time to show investors how to take advantage of these events to boost their returns by utilizing the Zacks Earnings ESP filter.
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.
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.
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 Nike?
The final step today is to look at a stock that meets our ESP qualifications. Nike (NKE - Free Report) earns a #3 (Hold) five days from its next quarterly earnings release on December 20, 2022, and its Most Accurate Estimate comes in at $0.66 a share.
Nike's Earnings ESP sits at +1.09%, which, as explained above, is calculated by taking the percentage difference between the $0.66 Most Accurate Estimate and the Zacks Consensus Estimate of $0.65. NKE is also part of a large group of stocks that boast a positive ESP. Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they've reported.
NKE is part of a big group of Consumer Discretionary stocks that boast a positive ESP, and investors may want to take a look at Caesars Entertainment (CZR - Free Report) as well.
Slated to report earnings on February 28, 2023, Caesars Entertainment holds a #2 (Buy) ranking on the Zacks Rank, and it's Most Accurate Estimate is $0.15 a share 75 days from its next quarterly update.
The Zacks Consensus Estimate for Caesars Entertainment is $0.13, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +19.32%.
Because both stocks hold a positive Earnings ESP, NKE and CZR 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 >>
7 Best Stocks for the Next 30 Days
Just released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."
Since 1988, the full list has beaten the market more than 2X over with an average gain of +24.2% per year. So be sure to give these hand picked 7 your immediate attention.
See them now >>
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