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Want Better Returns? Don?t Ignore These 2 Oils and Energy Stocks Set to Beat Earnings

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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.

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 Expected Surprise Prediction, or ESP, works by locking in on the most up-to-date analyst earnings revisions because they can be more accurate than estimates from weeks or even months before the actual release date. The thinking is pretty straightforward: analysts who provide earnings estimates closer to the report are likely to have more information.

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 #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 Sunnova Energy?

The final step today is to look at a stock that meets our ESP qualifications. Sunnova Energy (NOVA - Free Report) earns a #3 (Hold) eight days from its next quarterly earnings release on April 26, 2023, and its Most Accurate Estimate comes in at -$0.44 a share.

By taking the percentage difference between the -$0.44 Most Accurate Estimate and the -$0.54 Zacks Consensus Estimate, Sunnova Energy has an Earnings ESP of +18.59%. Investors should also know that NOVA 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.

NOVA is just one of a large group of Oils and Energy stocks with a positive ESP figure. Magellan Midstream Partners is another qualifying stock you may want to consider.

Magellan Midstream Partners is a Zacks Rank #2 (Buy) stock, and is getting ready to report earnings on May 4, 2023. MMP's Most Accurate Estimate sits at $1.20 a share 16 days from its next earnings release.

The Zacks Consensus Estimate for Magellan Midstream Partners is $1.19, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +0.84%.

Because both stocks hold a positive Earnings ESP, NOVA and MMP 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 >>

See More Zacks Research for These Tickers

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Sunnova Energy International Inc. (NOVA) - free report >>

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