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 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.
Most stocks, about 60%, fall into the #3 (Hold) category, and they are expected to perform in-line with the broader market. Stocks with a #2 (Buy) and #1 (Strong Buy) rating, or the top 15% and top 5% of stocks, respectively, should outperform the market, with Strong Buy stocks outperforming more than any other rank.
Should You Consider Equinix?
The final step today is to look at a stock that meets our ESP qualifications. Equinix (EQIX - Free Report) earns a #2 (Buy) five days from its next quarterly earnings release on May 1, 2024, and its Most Accurate Estimate comes in at $8.71 a share.
Equinix's Earnings ESP sits at +1.49%, which, as explained above, is calculated by taking the percentage difference between the $8.71 Most Accurate Estimate and the Zacks Consensus Estimate of $8.58. EQIX 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.
EQIX is one of just a large database of Finance stocks with positive ESPs. Another solid-looking stock is Agree Realty (ADC - Free Report) .
Slated to report earnings on August 6, 2024, Agree Realty holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is $1.02 a share 102 days from its next quarterly update.
For Agree Realty, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $1.02 is +0.33%.
Because both stocks hold a positive Earnings ESP, EQIX and ADC 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 >>
Buy 5 Stocks BEFORE Election Day
Biden or Trump? Zacks is releasing a FREE Special Report, Profit from the 2024 Presidential Election (no matter who wins).
Since 1950, presidential election years have been strong for the market. This report names 5 timely stocks to ride the wave of electoral excitement.
They include a medical manufacturer that gained +11,000% in the last 15 years… a rental company absolutely crushing its sector… an energy powerhouse planning to grow its already large dividend by 25%... an aerospace and defense standout that just landed a potentially $80 billion contract… and a giant chipmaker building huge plants in the U.S.
Don’t Wait. Download 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 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.
Most stocks, about 60%, fall into the #3 (Hold) category, and they are expected to perform in-line with the broader market. Stocks with a #2 (Buy) and #1 (Strong Buy) rating, or the top 15% and top 5% of stocks, respectively, should outperform the market, with Strong Buy stocks outperforming more than any other rank.
Should You Consider Equinix?
The final step today is to look at a stock that meets our ESP qualifications. Equinix (EQIX - Free Report) earns a #2 (Buy) five days from its next quarterly earnings release on May 1, 2024, and its Most Accurate Estimate comes in at $8.71 a share.
Equinix's Earnings ESP sits at +1.49%, which, as explained above, is calculated by taking the percentage difference between the $8.71 Most Accurate Estimate and the Zacks Consensus Estimate of $8.58. EQIX 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.
EQIX is one of just a large database of Finance stocks with positive ESPs. Another solid-looking stock is Agree Realty (ADC - Free Report) .
Slated to report earnings on August 6, 2024, Agree Realty holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is $1.02 a share 102 days from its next quarterly update.
For Agree Realty, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $1.02 is +0.33%.
Because both stocks hold a positive Earnings ESP, EQIX and ADC 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 >>
Buy 5 Stocks BEFORE Election Day
Biden or Trump? Zacks is releasing a FREE Special Report, Profit from the 2024 Presidential Election (no matter who wins).
Since 1950, presidential election years have been strong for the market. This report names 5 timely stocks to ride the wave of electoral excitement.
They include a medical manufacturer that gained +11,000% in the last 15 years… a rental company absolutely crushing its sector… an energy powerhouse planning to grow its already large dividend by 25%... an aerospace and defense standout that just landed a potentially $80 billion contract… and a giant chipmaker building huge plants in the U.S.
Don’t Wait. Download FREE >>
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