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.
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 MasterCard?
Now that we understand what the ESP is and how beneficial it can be, let's dive into a stock that currently fits the bill. MasterCard (MA - Free Report) earns a #3 (Hold) right now and its Most Accurate Estimate sits at $3.24 a share, just nine days from its upcoming earnings release on May 1, 2024.
MasterCard's Earnings ESP sits at +0.39%, which, as explained above, is calculated by taking the percentage difference between the $3.24 Most Accurate Estimate and the Zacks Consensus Estimate of $3.22. MA 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.
MA is part of a big group of Business Services stocks that boast a positive ESP, and investors may want to take a look at Arm Holdings (ARM - Free Report) as well.
Arm Holdings, which is readying to report earnings on May 8, 2024, sits at a Zacks Rank #2 (Buy) right now. It's Most Accurate Estimate is currently $0.32 a share, and ARM is 16 days out from its next earnings report.
Arm Holdings' Earnings ESP figure currently stands at +5.26% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $0.30.
Because both stocks hold a positive Earnings ESP, MA and ARM 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 >>
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.
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 MasterCard?
Now that we understand what the ESP is and how beneficial it can be, let's dive into a stock that currently fits the bill. MasterCard (MA - Free Report) earns a #3 (Hold) right now and its Most Accurate Estimate sits at $3.24 a share, just nine days from its upcoming earnings release on May 1, 2024.
MasterCard's Earnings ESP sits at +0.39%, which, as explained above, is calculated by taking the percentage difference between the $3.24 Most Accurate Estimate and the Zacks Consensus Estimate of $3.22. MA 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.
MA is part of a big group of Business Services stocks that boast a positive ESP, and investors may want to take a look at Arm Holdings (ARM - Free Report) as well.
Arm Holdings, which is readying to report earnings on May 8, 2024, sits at a Zacks Rank #2 (Buy) right now. It's Most Accurate Estimate is currently $0.32 a share, and ARM is 16 days out from its next earnings report.
Arm Holdings' Earnings ESP figure currently stands at +5.26% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $0.30.
Because both stocks hold a positive Earnings ESP, MA and ARM 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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