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Here's How Investors Can Find Strong Industrial Products Stocks with the Zacks ESP Screener
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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.
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 Heritage-Crystal Clean?
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. Heritage-Crystal Clean holds a #1 (Strong Buy) at the moment and its Most Accurate Estimate comes in at $0.95 a share 26 days away from its upcoming earnings release on October 19, 2022.
HCCI has an Earnings ESP figure of +11.77%, which, as explained above, is calculated by taking the percentage difference between the $0.95 Most Accurate Estimate and the Zacks Consensus Estimate of $0.85. Heritage-Crystal Clean 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.
HCCI is one of just a large database of Industrial Products stocks with positive ESPs. Another solid-looking stock is Deere (DE - Free Report) .
Deere, which is readying to report earnings on November 23, 2022, sits at a Zacks Rank #3 (Hold) right now. It's Most Accurate Estimate is currently $7.16 a share, and DE is 61 days out from its next earnings report.
For Deere, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $7.14 is +0.3%.
HCCI and DE'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 >>
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Here's How Investors Can Find Strong Industrial Products Stocks with the Zacks ESP Screener
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.
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 Heritage-Crystal Clean?
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. Heritage-Crystal Clean holds a #1 (Strong Buy) at the moment and its Most Accurate Estimate comes in at $0.95 a share 26 days away from its upcoming earnings release on October 19, 2022.
HCCI has an Earnings ESP figure of +11.77%, which, as explained above, is calculated by taking the percentage difference between the $0.95 Most Accurate Estimate and the Zacks Consensus Estimate of $0.85. Heritage-Crystal Clean 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.
HCCI is one of just a large database of Industrial Products stocks with positive ESPs. Another solid-looking stock is Deere (DE - Free Report) .
Deere, which is readying to report earnings on November 23, 2022, sits at a Zacks Rank #3 (Hold) right now. It's Most Accurate Estimate is currently $7.16 a share, and DE is 61 days out from its next earnings report.
For Deere, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $7.14 is +0.3%.
HCCI and DE'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 >>