Earnings are arguably the most important single number on a company's quarterly financial report. Wall Street clearly dives into all of the other metrics and management's input, but the EPS figure helps cut through all the noise.
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.
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 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.
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.
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 Centene?
The final step today is to look at a stock that meets our ESP qualifications.
Centene ( earns a #2 (Buy) 28 days from its next quarterly earnings release on October 25, 2022, and its Most Accurate Estimate comes in at $1.23 a share. CNC Quick Quote CNC - Free Report)
Centene's Earnings ESP sits at +0.82%, which, as explained above, is calculated by taking the percentage difference between the $1.23 Most Accurate Estimate and the Zacks Consensus Estimate of $1.22. CNC 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.
CNC is part of a big group of Medical stocks that boast a positive ESP, and investors may want to take a look at
Exact Sciences ( as well. EXAS Quick Quote EXAS - Free Report)
Exact Sciences, which is readying to report earnings on November 1, 2022, sits at a Zacks Rank #3 (Hold) right now. It's Most Accurate Estimate is currently -$0.96 a share, and EXAS is 35 days out from its next earnings report.
For Exact Sciences, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of -$1.09 is +12.04%.
CNC and EXAS' positive ESP metrics may signal that a positive earnings surprise for both stocks is on the horizon.
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 >>