Quarterly financial reports play a vital role on Wall Street, as they help investors see how a company has performed and what might be coming down the road in the near-term. And out of all of the metrics and results to consider, earnings is one of the most important.
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 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.
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 T-Mobile?
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. T-Mobile (TMUS - Free Report) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at $1.69 a share 26 days away from its upcoming earnings release on April 26, 2023.
By taking the percentage difference between the $1.69 Most Accurate Estimate and the $1.45 Zacks Consensus Estimate, T-Mobile has an Earnings ESP of +16.35%. Investors should also know that TMUS 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.
TMUS is just one of a large group of Computer and Technology stocks with a positive ESP figure. RingCentral (RNG - Free Report) is another qualifying stock you may want to consider.
RingCentral, which is readying to report earnings on May 8, 2023, sits at a Zacks Rank #3 (Hold) right now. It's Most Accurate Estimate is currently $0.70 a share, and RNG is 38 days out from its next earnings report.
The Zacks Consensus Estimate for RingCentral is $0.69, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +0.95%.
Because both stocks hold a positive Earnings ESP, TMUS and RNG 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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Quarterly financial reports play a vital role on Wall Street, as they help investors see how a company has performed and what might be coming down the road in the near-term. And out of all of the metrics and results to consider, earnings is one of the most important.
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 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.
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 T-Mobile?
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. T-Mobile (TMUS - Free Report) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at $1.69 a share 26 days away from its upcoming earnings release on April 26, 2023.
By taking the percentage difference between the $1.69 Most Accurate Estimate and the $1.45 Zacks Consensus Estimate, T-Mobile has an Earnings ESP of +16.35%. Investors should also know that TMUS 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.
TMUS is just one of a large group of Computer and Technology stocks with a positive ESP figure. RingCentral (RNG - Free Report) is another qualifying stock you may want to consider.
RingCentral, which is readying to report earnings on May 8, 2023, sits at a Zacks Rank #3 (Hold) right now. It's Most Accurate Estimate is currently $0.70 a share, and RNG is 38 days out from its next earnings report.
The Zacks Consensus Estimate for RingCentral is $0.69, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +0.95%.
Because both stocks hold a positive Earnings ESP, TMUS and RNG 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 >>
Free Report Reveals How You Could Profit from the Growing Electric Vehicle Industry
Globally, electric car sales continue their remarkable growth even after breaking records in 2021. High gas prices have fueled his demand, but so has evolving EV comfort, features and technology. So, the fervor for EVs will be around long after gas prices normalize. Not only are manufacturers seeing record-high profits, but producers of EV-related technology are raking in the dough as well. Do you know how to cash in? If not, we have the perfect report for you – and it’s FREE! Today, don't miss your chance to download Zacks' top 5 stocks for the electric vehicle revolution at no cost and with no obligation.
>>Send me my free report on the top 5 EV stocks<<
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