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How to Boost Your Portfolio with Top Oils and Energy Stocks Set to Beat Earnings

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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.

Now that we know how important earnings and earnings surprises are, it's time to show investors how to take advantage of these events to boost their returns by utilizing the Zacks Earnings ESP filter.

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.

When we join a positive earnings ESP with a Zacks Rank #3 (Hold) or stronger, stocks posted a positive bottom-line surprise 70% of the time. Plus, this system saw investors produce roughly 28% 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 Patterson-UTI?

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. Patterson-UTI (PTEN - Free Report) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at $0.45 a share 29 days away from its upcoming earnings release on July 26, 2023.

Patterson-UTI's Earnings ESP sits at +1.61%, which, as explained above, is calculated by taking the percentage difference between the $0.45 Most Accurate Estimate and the Zacks Consensus Estimate of $0.44. PTEN 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.

PTEN is one of just a large database of Oils and Energy stocks with positive ESPs. Another solid-looking stock is Transocean (RIG - Free Report) .

Slated to report earnings on August 7, 2023, Transocean holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is -$0.10 a share 41 days from its next quarterly update.

The Zacks Consensus Estimate for Transocean is -$0.11, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +7.69%.

PTEN and RIG'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:


Transocean Ltd. (RIG) - free report >>

Patterson-UTI Energy, Inc. (PTEN) - free report >>

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