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Zacks Earnings ESP: A Better Way to Find Earnings Surprises for Oils and Energy

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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.

We know earnings results are vital, but how a company performs compared to bottom line expectations can be even more important when it comes to stock prices, especially in the near-term. This means that investors might want to take advantage of these earnings surprises.

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 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.

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 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 Vermilion Energy?

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. Vermilion Energy (VET - Free Report) holds a #2 (Buy) at the moment and its Most Accurate Estimate comes in at $2.28 a share two days away from its upcoming earnings release on August 11, 2022.

By taking the percentage difference between the $2.28 Most Accurate Estimate and the $1.61 Zacks Consensus Estimate, Vermilion Energy has an Earnings ESP of +41.62%. Investors should also know that VET 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.

VET is part of a big group of Oils and Energy stocks that boast a positive ESP, and investors may want to take a look at Helmerich & Payne (HP - Free Report) as well.

Helmerich & Payne, which is readying to report earnings on November 16, 2022, sits at a Zacks Rank #2 (Buy) right now. It's Most Accurate Estimate is currently $0.44 a share, and HP is 99 days out from its next earnings report.

Helmerich & Payne's Earnings ESP figure currently stands at +8.64% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $0.41.

VET and HP's positive ESP figures tell us that both stocks have a good chance at beating analyst expectations in their next earnings report.

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 >>


In-Depth Zacks Research for the Tickers Above


Normally $25 each - click below to receive one report FREE:


Helmerich & Payne, Inc. (HP) - free report >>

Vermilion Energy Inc. (VET) - free report >>

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