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How to Find Strong Finance 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.
Hunting for 'earnings whispers' or companies poised to beat their quarterly earnings estimates is a somewhat common practice. But that doesn't make it easy. One way that has been proven to work is by using the Zacks Earnings ESP tool.
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.
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.
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 LendingClub?
Now that we understand what the ESP is and how beneficial it can be, let's dive into a stock that currently fits the bill. LendingClub (LC - Free Report) earns a #2 (Buy) right now and its Most Accurate Estimate sits at $0.22 a share, just five days from its upcoming earnings release on January 25, 2023.
LendingClub's Earnings ESP sits at +5.74%, which, as explained above, is calculated by taking the percentage difference between the $0.22 Most Accurate Estimate and the Zacks Consensus Estimate of $0.20. LC 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.
LC is one of just a large database of Finance stocks with positive ESPs. Another solid-looking stock is Chubb (CB - Free Report) .
Chubb, which is readying to report earnings on January 31, 2023, sits at a Zacks Rank #3 (Hold) right now. It's Most Accurate Estimate is currently $4.33 a share, and CB is 11 days out from its next earnings report.
Chubb's Earnings ESP figure currently stands at +2.72% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $4.22.
LC and CB'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 Finance 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.
Hunting for 'earnings whispers' or companies poised to beat their quarterly earnings estimates is a somewhat common practice. But that doesn't make it easy. One way that has been proven to work is by using the Zacks Earnings ESP tool.
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.
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.
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 LendingClub?
Now that we understand what the ESP is and how beneficial it can be, let's dive into a stock that currently fits the bill. LendingClub (LC - Free Report) earns a #2 (Buy) right now and its Most Accurate Estimate sits at $0.22 a share, just five days from its upcoming earnings release on January 25, 2023.
LendingClub's Earnings ESP sits at +5.74%, which, as explained above, is calculated by taking the percentage difference between the $0.22 Most Accurate Estimate and the Zacks Consensus Estimate of $0.20. LC 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.
LC is one of just a large database of Finance stocks with positive ESPs. Another solid-looking stock is Chubb (CB - Free Report) .
Chubb, which is readying to report earnings on January 31, 2023, sits at a Zacks Rank #3 (Hold) right now. It's Most Accurate Estimate is currently $4.33 a share, and CB is 11 days out from its next earnings report.
Chubb's Earnings ESP figure currently stands at +2.72% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $4.22.
LC and CB'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 >>