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How to Find Strong Oils and Energy Stocks Slated for Positive Earnings Surprises

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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.

The earnings figure itself is key, of course, but a beat or miss on the bottom line can sometimes be just as, if not more, important. Therefore, investors should consider paying close attention to these earnings surprises, as a big beat can help a stock climb and vice versa.

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 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.

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 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 Suncor Energy?

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. Suncor Energy (SU - Free Report) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at $1.50 a share 30 days away from its upcoming earnings release on February 1, 2023.

Suncor Energy's Earnings ESP sits at +5.04%, which, as explained above, is calculated by taking the percentage difference between the $1.50 Most Accurate Estimate and the Zacks Consensus Estimate of $1.42. SU 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.

SU is part of a big group of Oils and Energy stocks that boast a positive ESP, and investors may want to take a look at BP (BP - Free Report) as well.

Slated to report earnings on February 14, 2023, BP holds a #2 (Buy) ranking on the Zacks Rank, and it's Most Accurate Estimate is $1.81 a share 43 days from its next quarterly update.

BP's Earnings ESP figure currently stands at +1.75% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $1.77.

Because both stocks hold a positive Earnings ESP, SU and BP 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 >>


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


BP p.l.c. (BP) - free report >>

Suncor Energy Inc. (SU) - free report >>

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