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Zacks Earnings ESP: A Better Way to Find Earnings Surprises for Finance
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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.
The ability to identify stocks that are likely to top quarterly earnings expectations can be profitable, but it's no simple task. Here at Zacks, our Earnings ESP filter helps make things easier.
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.
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.
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 Signature Bank?
The final step today is to look at a stock that meets our ESP qualifications. Signature Bank (SBNY - Free Report) earns a #3 (Hold) one day from its next quarterly earnings release on October 18, 2022, and its Most Accurate Estimate comes in at $5.45 a share.
SBNY has an Earnings ESP figure of +0.57%, which, as explained above, is calculated by taking the percentage difference between the $5.45 Most Accurate Estimate and the Zacks Consensus Estimate of $5.42. Signature Bank 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.
SBNY is part of a big group of Finance stocks that boast a positive ESP, and investors may want to take a look at Cigna (CI - Free Report) as well.
Slated to report earnings on November 3, 2022, Cigna holds a #2 (Buy) ranking on the Zacks Rank, and it's Most Accurate Estimate is $5.70 a share 17 days from its next quarterly update.
The Zacks Consensus Estimate for Cigna is $5.70, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +0.07%.
SBNY and CI's 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 >>
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Zacks Earnings ESP: A Better Way to Find Earnings Surprises for Finance
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.
The ability to identify stocks that are likely to top quarterly earnings expectations can be profitable, but it's no simple task. Here at Zacks, our Earnings ESP filter helps make things easier.
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.
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.
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 Signature Bank?
The final step today is to look at a stock that meets our ESP qualifications. Signature Bank (SBNY - Free Report) earns a #3 (Hold) one day from its next quarterly earnings release on October 18, 2022, and its Most Accurate Estimate comes in at $5.45 a share.
SBNY has an Earnings ESP figure of +0.57%, which, as explained above, is calculated by taking the percentage difference between the $5.45 Most Accurate Estimate and the Zacks Consensus Estimate of $5.42. Signature Bank 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.
SBNY is part of a big group of Finance stocks that boast a positive ESP, and investors may want to take a look at Cigna (CI - Free Report) as well.
Slated to report earnings on November 3, 2022, Cigna holds a #2 (Buy) ranking on the Zacks Rank, and it's Most Accurate Estimate is $5.70 a share 17 days from its next quarterly update.
The Zacks Consensus Estimate for Cigna is $5.70, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +0.07%.
SBNY and CI's 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 >>