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These 2 Construction Stocks Could Beat Earnings: Why They Should Be on Your Radar
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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.
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, 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.
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 PulteGroup?
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. PulteGroup (PHM - Free Report) holds a #1 (Strong Buy) at the moment and its Most Accurate Estimate comes in at $2.54 a share 27 days away from its upcoming earnings release on July 25, 2023.
By taking the percentage difference between the $2.54 Most Accurate Estimate and the $2.46 Zacks Consensus Estimate, PulteGroup has an Earnings ESP of +2.87%. Investors should also know that PHM 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.
PHM is part of a big group of Construction stocks that boast a positive ESP, and investors may want to take a look at Toll Brothers (TOL - Free Report) as well.
Toll Brothers is a Zacks Rank #1 (Strong Buy) stock, and is getting ready to report earnings on August 22, 2023. TOL's Most Accurate Estimate sits at $2.87 a share 55 days from its next earnings release.
The Zacks Consensus Estimate for Toll Brothers is $2.86, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +0.19%.
PHM and TOL'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 >>
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These 2 Construction Stocks Could Beat Earnings: Why They Should Be on Your Radar
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.
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, 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.
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 PulteGroup?
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. PulteGroup (PHM - Free Report) holds a #1 (Strong Buy) at the moment and its Most Accurate Estimate comes in at $2.54 a share 27 days away from its upcoming earnings release on July 25, 2023.
By taking the percentage difference between the $2.54 Most Accurate Estimate and the $2.46 Zacks Consensus Estimate, PulteGroup has an Earnings ESP of +2.87%. Investors should also know that PHM 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.
PHM is part of a big group of Construction stocks that boast a positive ESP, and investors may want to take a look at Toll Brothers (TOL - Free Report) as well.
Toll Brothers is a Zacks Rank #1 (Strong Buy) stock, and is getting ready to report earnings on August 22, 2023. TOL's Most Accurate Estimate sits at $2.87 a share 55 days from its next earnings release.
The Zacks Consensus Estimate for Toll Brothers is $2.86, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +0.19%.
PHM and TOL'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 >>