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.
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 is more formally known as the Expected Surprise Prediction, and it aims to grab the inside track on the latest analyst estimate revisions ahead of a company's report. The idea is relatively intuitive as a newer projection might be based on more complete information.
The core of the ESP model is comparing the Most Accurate Estimate to the Zacks Consensus Estimate, where the resulting percentage difference between the two equals the Expected Surprise Prediction. The Zacks Rank is also factored into the ESP metric to better help find companies that appear poised to top their next bottom-line consensus estimate, which will hopefully help lift the stock price.
Bringing together a positive earnings ESP alongside a Zacks Rank #3 (Hold) or better has helped stocks report a positive earnings surprise 70% of the time. Furthermore, by using these parameters, investors have seen 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 Citizens Financial Group?
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.
Citizens Financial Group ( holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at $1.28 a share 30 days away from its upcoming earnings release on October 19, 2022. CFG Quick Quote CFG - Free Report)
CFG has an Earnings ESP figure of +3.34%, which, as explained above, is calculated by taking the percentage difference between the $1.28 Most Accurate Estimate and the Zacks Consensus Estimate of $1.24. Citizens Financial Group 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.
CFG is just one of a large group of Finance stocks with a positive ESP figure.
Iron Mountain ( is another qualifying stock you may want to consider. IRM Quick Quote IRM - Free Report)
Slated to report earnings on November 3, 2022, Iron Mountain holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is $0.97 a share 45 days from its next quarterly update.
For Iron Mountain, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $0.96 is +1.04%.
Because both stocks hold a positive Earnings ESP, CFG and IRM 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 >>