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How to Find Strong Utilities Stocks Slated for Positive Earnings Surprises
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Wall Street watches a company's quarterly report closely to understand as much as possible about its recent performance and what to expect going forward. Of course, one figure often stands out among the rest: earnings.
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.
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.
In fact, when we combined a Zacks Rank #3 (Hold) or better and a positive Earnings ESP, stocks produced a positive surprise 70% of the time. Perhaps most importantly, using these parameters has helped produce 28.3% annual returns on average, according to our 10 year backtest.
Stocks with a #3 (Hold) ranking, which is most stocks covered at 60%, are expected to perform in-line with the broader market. But stocks that fall into the #2 (Buy) and #1 (Strong Buy) ranking, 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 Sempra?
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. Sempra (SRE - Free Report) earns a #3 (Hold) right now and its Most Accurate Estimate sits at $2.90 a share, just 28 days from its upcoming earnings release on May 4, 2023.
By taking the percentage difference between the $2.90 Most Accurate Estimate and the $2.88 Zacks Consensus Estimate, Sempra has an Earnings ESP of +0.49%. Investors should also know that SRE 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.
SRE is one of just a large database of Utilities stocks with positive ESPs. Another solid-looking stock is Edison International (EIX - Free Report) .
Edison International, which is readying to report earnings on May 2, 2023, sits at a Zacks Rank #3 (Hold) right now. It's Most Accurate Estimate is currently $1.05 a share, and EIX is 26 days out from its next earnings report.
For Edison International, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $1.05 is +0.55%.
Because both stocks hold a positive Earnings ESP, SRE and EIX 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 >>
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How to Find Strong Utilities Stocks Slated for Positive Earnings Surprises
Wall Street watches a company's quarterly report closely to understand as much as possible about its recent performance and what to expect going forward. Of course, one figure often stands out among the rest: earnings.
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.
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.
In fact, when we combined a Zacks Rank #3 (Hold) or better and a positive Earnings ESP, stocks produced a positive surprise 70% of the time. Perhaps most importantly, using these parameters has helped produce 28.3% annual returns on average, according to our 10 year backtest.
Stocks with a #3 (Hold) ranking, which is most stocks covered at 60%, are expected to perform in-line with the broader market. But stocks that fall into the #2 (Buy) and #1 (Strong Buy) ranking, 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 Sempra?
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. Sempra (SRE - Free Report) earns a #3 (Hold) right now and its Most Accurate Estimate sits at $2.90 a share, just 28 days from its upcoming earnings release on May 4, 2023.
By taking the percentage difference between the $2.90 Most Accurate Estimate and the $2.88 Zacks Consensus Estimate, Sempra has an Earnings ESP of +0.49%. Investors should also know that SRE 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.
SRE is one of just a large database of Utilities stocks with positive ESPs. Another solid-looking stock is Edison International (EIX - Free Report) .
Edison International, which is readying to report earnings on May 2, 2023, sits at a Zacks Rank #3 (Hold) right now. It's Most Accurate Estimate is currently $1.05 a share, and EIX is 26 days out from its next earnings report.
For Edison International, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $1.05 is +0.55%.
Because both stocks hold a positive Earnings ESP, SRE and EIX 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 >>