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How to Find Strong Medical Stocks Slated for Positive Earnings Surprises
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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 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 Cardinal Health?
The final step today is to look at a stock that meets our ESP qualifications. Cardinal Health (CAH - Free Report) earns a #2 (Buy) 30 days from its next quarterly earnings release on February 2, 2023, and its Most Accurate Estimate comes in at $1.51 a share.
Cardinal Health's Earnings ESP sits at +28.43%, which, as explained above, is calculated by taking the percentage difference between the $1.51 Most Accurate Estimate and the Zacks Consensus Estimate of $1.18. CAH 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.
CAH is one of just a large database of Medical stocks with positive ESPs. Another solid-looking stock is Sanofi (SNY - Free Report) .
Slated to report earnings on February 3, 2023, Sanofi holds a #2 (Buy) ranking on the Zacks Rank, and it's Most Accurate Estimate is $0.91 a share 31 days from its next quarterly update.
For Sanofi, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $0.89 is +2.25%.
CAH and SNY'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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How to Find Strong Medical Stocks Slated for Positive Earnings Surprises
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 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 Cardinal Health?
The final step today is to look at a stock that meets our ESP qualifications. Cardinal Health (CAH - Free Report) earns a #2 (Buy) 30 days from its next quarterly earnings release on February 2, 2023, and its Most Accurate Estimate comes in at $1.51 a share.
Cardinal Health's Earnings ESP sits at +28.43%, which, as explained above, is calculated by taking the percentage difference between the $1.51 Most Accurate Estimate and the Zacks Consensus Estimate of $1.18. CAH 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.
CAH is one of just a large database of Medical stocks with positive ESPs. Another solid-looking stock is Sanofi (SNY - Free Report) .
Slated to report earnings on February 3, 2023, Sanofi holds a #2 (Buy) ranking on the Zacks Rank, and it's Most Accurate Estimate is $0.91 a share 31 days from its next quarterly update.
For Sanofi, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $0.89 is +2.25%.
CAH and SNY'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 >>