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Zacks Earnings ESP: A Better Way to Find Earnings Surprises for Industrial Products
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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.
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 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.
When we join a positive earnings ESP with a Zacks Rank #3 (Hold) or stronger, stocks posted a positive bottom-line surprise 70% of the time. Plus, this system saw investors produce roughly 28% 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 Greif?
The final step today is to look at a stock that meets our ESP qualifications. Greif (GEF - Free Report) earns a #3 (Hold) 30 days from its next quarterly earnings release on December 14, 2022, and its Most Accurate Estimate comes in at $1.96 a share.
By taking the percentage difference between the $1.96 Most Accurate Estimate and the $1.95 Zacks Consensus Estimate, Greif has an Earnings ESP of +0.34%. Investors should also know that GEF 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.
GEF is part of a big group of Industrial Products stocks that boast a positive ESP, and investors may want to take a look at Caterpillar (CAT - Free Report) as well.
Slated to report earnings on January 27, 2023, Caterpillar holds a #2 (Buy) ranking on the Zacks Rank, and it's Most Accurate Estimate is $3.82 a share 74 days from its next quarterly update.
Caterpillar's Earnings ESP figure currently stands at +0.57% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $3.80.
GEF and CAT'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 Industrial Products
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.
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 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.
When we join a positive earnings ESP with a Zacks Rank #3 (Hold) or stronger, stocks posted a positive bottom-line surprise 70% of the time. Plus, this system saw investors produce roughly 28% 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 Greif?
The final step today is to look at a stock that meets our ESP qualifications. Greif (GEF - Free Report) earns a #3 (Hold) 30 days from its next quarterly earnings release on December 14, 2022, and its Most Accurate Estimate comes in at $1.96 a share.
By taking the percentage difference between the $1.96 Most Accurate Estimate and the $1.95 Zacks Consensus Estimate, Greif has an Earnings ESP of +0.34%. Investors should also know that GEF 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.
GEF is part of a big group of Industrial Products stocks that boast a positive ESP, and investors may want to take a look at Caterpillar (CAT - Free Report) as well.
Slated to report earnings on January 27, 2023, Caterpillar holds a #2 (Buy) ranking on the Zacks Rank, and it's Most Accurate Estimate is $3.82 a share 74 days from its next quarterly update.
Caterpillar's Earnings ESP figure currently stands at +0.57% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $3.80.
GEF and CAT'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 >>