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Looking for Stocks with Positive Earnings Momentum? Check Out These 2 Basic Materials Names

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Quarterly financial reports play a vital role on Wall Street, as they help investors see how a company has performed and what might be coming down the road in the near-term. And out of all of the metrics and results to consider, earnings is one of the most important.

We know earnings results are vital, but how a company performs compared to bottom line expectations can be even more important when it comes to stock prices, especially in the near-term. This means that investors might want to take advantage of these earnings surprises.

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 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.

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.

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 Royal Gold?

The final step today is to look at a stock that meets our ESP qualifications. Royal Gold (RGLD - Free Report) earns a #3 (Hold) 26 days from its next quarterly earnings release on May 3, 2023, and its Most Accurate Estimate comes in at $1.03 a share.

By taking the percentage difference between the $1.03 Most Accurate Estimate and the $0.96 Zacks Consensus Estimate, Royal Gold has an Earnings ESP of +7.29%. Investors should also know that RGLD 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.

RGLD is part of a big group of Basic Materials stocks that boast a positive ESP, and investors may want to take a look at Barrick Gold (GOLD - Free Report) as well.

Barrick Gold is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on May 3, 2023. GOLD's Most Accurate Estimate sits at $0.20 a share 26 days from its next earnings release.

The Zacks Consensus Estimate for Barrick Gold is $0.18, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +10.8%.

RGLD and GOLD'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 >>


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


Barrick Gold Corporation (GOLD) - free report >>

Royal Gold, Inc. (RGLD) - free report >>

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