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How to Boost Your Portfolio with Top Industrial Products Stocks Set to Beat Earnings
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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 Earnings ESP, or Expected Surprise Prediction, aims to find earnings surprises by focusing on the most recent analyst revisions. The basic premise is that if an analyst reevaluates their earnings estimate ahead of an earnings release, it means they likely have new information that could possibly be more accurate.
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.
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 Caterpillar?
The final step today is to look at a stock that meets our ESP qualifications. Caterpillar (CAT - Free Report) earns a #3 (Hold) 20 days from its next quarterly earnings release on January 31, 2023, and its Most Accurate Estimate comes in at $4.04 a share.
By taking the percentage difference between the $4.04 Most Accurate Estimate and the $3.96 Zacks Consensus Estimate, Caterpillar has an Earnings ESP of +1.87%. Investors should also know that CAT 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.
CAT is part of a big group of Industrial Products stocks that boast a positive ESP, and investors may want to take a look at Illinois Tool Works (ITW - Free Report) as well.
Illinois Tool Works is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on February 2, 2023. ITW's Most Accurate Estimate sits at $2.66 a share 22 days from its next earnings release.
The Zacks Consensus Estimate for Illinois Tool Works is $2.61, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +1.92%.
CAT and ITW'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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How to Boost Your Portfolio with Top Industrial Products Stocks Set to Beat Earnings
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 Earnings ESP, or Expected Surprise Prediction, aims to find earnings surprises by focusing on the most recent analyst revisions. The basic premise is that if an analyst reevaluates their earnings estimate ahead of an earnings release, it means they likely have new information that could possibly be more accurate.
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.
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 Caterpillar?
The final step today is to look at a stock that meets our ESP qualifications. Caterpillar (CAT - Free Report) earns a #3 (Hold) 20 days from its next quarterly earnings release on January 31, 2023, and its Most Accurate Estimate comes in at $4.04 a share.
By taking the percentage difference between the $4.04 Most Accurate Estimate and the $3.96 Zacks Consensus Estimate, Caterpillar has an Earnings ESP of +1.87%. Investors should also know that CAT 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.
CAT is part of a big group of Industrial Products stocks that boast a positive ESP, and investors may want to take a look at Illinois Tool Works (ITW - Free Report) as well.
Illinois Tool Works is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on February 2, 2023. ITW's Most Accurate Estimate sits at $2.66 a share 22 days from its next earnings release.
The Zacks Consensus Estimate for Illinois Tool Works is $2.61, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +1.92%.
CAT and ITW'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 >>