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.
Life and the stock market are both about expectations, and rising above what is expected is often rewarded, while falling short can come with negative consequences. Investors might want to try to capture stronger returns by finding positive earnings surprises.
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, 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.
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 ranking of #3 (Hold), or 60% of all stocks covered by the Zacks Rank, are expected to perform in-line with the broader market. Stocks with rankings of #2 (Buy) and #1 (Strong Buy), 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 Humana?
The final step today is to look at a stock that meets our ESP qualifications. Humana (HUM - Free Report) earns a #3 (Hold) nine days from its next quarterly earnings release on February 1, 2023, and its Most Accurate Estimate comes in at $1.47 a share.
HUM has an Earnings ESP figure of +0.04%, which, as explained above, is calculated by taking the percentage difference between the $1.47 Most Accurate Estimate and the Zacks Consensus Estimate of $1.46. Humana 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.
HUM is just one of a large group of Medical stocks with a positive ESP figure. Novartis (NVS - Free Report) is another qualifying stock you may want to consider.
Novartis is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on February 1, 2023. NVS' Most Accurate Estimate sits at $1.44 a share nine days from its next earnings release.
Novartis' Earnings ESP figure currently stands at +1.03% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $1.42.
Because both stocks hold a positive Earnings ESP, HUM and NVS 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 >>
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s an American AI company that’s riding low right now, but it has rounded up clients like BMW, GE, Dell Computer, and Bosch. It has prospects for not just doubling but quadrupling in the year to come. Of course, all our picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock And 4 Runners Up
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.
Life and the stock market are both about expectations, and rising above what is expected is often rewarded, while falling short can come with negative consequences. Investors might want to try to capture stronger returns by finding positive earnings surprises.
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, 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.
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 ranking of #3 (Hold), or 60% of all stocks covered by the Zacks Rank, are expected to perform in-line with the broader market. Stocks with rankings of #2 (Buy) and #1 (Strong Buy), 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 Humana?
The final step today is to look at a stock that meets our ESP qualifications. Humana (HUM - Free Report) earns a #3 (Hold) nine days from its next quarterly earnings release on February 1, 2023, and its Most Accurate Estimate comes in at $1.47 a share.
HUM has an Earnings ESP figure of +0.04%, which, as explained above, is calculated by taking the percentage difference between the $1.47 Most Accurate Estimate and the Zacks Consensus Estimate of $1.46. Humana 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.
HUM is just one of a large group of Medical stocks with a positive ESP figure. Novartis (NVS - Free Report) is another qualifying stock you may want to consider.
Novartis is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on February 1, 2023. NVS' Most Accurate Estimate sits at $1.44 a share nine days from its next earnings release.
Novartis' Earnings ESP figure currently stands at +1.03% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $1.42.
Because both stocks hold a positive Earnings ESP, HUM and NVS 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 >>
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s an American AI company that’s riding low right now, but it has rounded up clients like BMW, GE, Dell Computer, and Bosch. It has prospects for not just doubling but quadrupling in the year to come. Of course, all our picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock And 4 Runners Up
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