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.
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.
With this in mind, the Expected Surprise Prediction compares the Most Accurate Estimate (being the most recent) against the overall Zacks Consensus Estimate. The percentage difference provides the ESP figure. The system also utilizes our core Zacks Rank to provide a stronger system for identifying stocks that might beat their next quarterly earnings estimate and possibly see the stock price climb.
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.
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 Casey's General Stores?
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.
Casey's General Stores ( holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at $1.91 a share 20 days away from its upcoming earnings release on March 7, 2023. CASY Quick Quote CASY - Free Report)
CASY has an Earnings ESP figure of +14.04%, which, as explained above, is calculated by taking the percentage difference between the $1.91 Most Accurate Estimate and the Zacks Consensus Estimate of $1.67. Casey's General Stores is one of a large database 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.
CASY is part of a big group of Retail and Wholesale stocks that boast a positive ESP, and investors may want to take a look at
Booking Holdings ( as well. BKNG Quick Quote BKNG - Free Report)
Booking Holdings is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on February 23, 2023. BKNG's Most Accurate Estimate sits at $21.07 a share eight days from its next earnings release.
Booking Holdings' Earnings ESP figure currently stands at +1.09% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $20.85.
Because both stocks hold a positive Earnings ESP, CASY and BKNG 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 >>