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These 2 Auto, Tires and Trucks Stocks Could Beat Earnings: Why They Should Be on Your Radar
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Two factors often determine stock prices in the long run: earnings and interest rates. Investors can't control the latter, but they can focus on a company's earnings results every quarter.
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.
The core of the ESP model is comparing the Most Accurate Estimate to the Zacks Consensus Estimate, where the resulting percentage difference between the two equals the Expected Surprise Prediction. The Zacks Rank is also factored into the ESP metric to better help find companies that appear poised to top their next bottom-line consensus estimate, which will hopefully help lift the stock price.
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 Tesla?
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. Tesla (TSLA - Free Report) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at $0.85 a share eight days away from its upcoming earnings release on July 19, 2023.
Tesla's Earnings ESP sits at +2.41%, which, as explained above, is calculated by taking the percentage difference between the $0.85 Most Accurate Estimate and the Zacks Consensus Estimate of $0.83. TSLA 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.
TSLA is just one of a large group of Auto, Tires and Trucks stocks with a positive ESP figure. Cummins (CMI - Free Report) is another qualifying stock you may want to consider.
Cummins is a Zacks Rank #2 (Buy) stock, and is getting ready to report earnings on August 3, 2023. CMI's Most Accurate Estimate sits at $5.27 a share 23 days from its next earnings release.
For Cummins, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $5.16 is +2.16%.
TSLA and CMI's positive ESP metrics may signal that a positive earnings surprise for both stocks is on the horizon.
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 Auto, Tires and Trucks Stocks Could Beat Earnings: Why They Should Be on Your Radar
Two factors often determine stock prices in the long run: earnings and interest rates. Investors can't control the latter, but they can focus on a company's earnings results every quarter.
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.
The core of the ESP model is comparing the Most Accurate Estimate to the Zacks Consensus Estimate, where the resulting percentage difference between the two equals the Expected Surprise Prediction. The Zacks Rank is also factored into the ESP metric to better help find companies that appear poised to top their next bottom-line consensus estimate, which will hopefully help lift the stock price.
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 Tesla?
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. Tesla (TSLA - Free Report) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at $0.85 a share eight days away from its upcoming earnings release on July 19, 2023.
Tesla's Earnings ESP sits at +2.41%, which, as explained above, is calculated by taking the percentage difference between the $0.85 Most Accurate Estimate and the Zacks Consensus Estimate of $0.83. TSLA 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.
TSLA is just one of a large group of Auto, Tires and Trucks stocks with a positive ESP figure. Cummins (CMI - Free Report) is another qualifying stock you may want to consider.
Cummins is a Zacks Rank #2 (Buy) stock, and is getting ready to report earnings on August 3, 2023. CMI's Most Accurate Estimate sits at $5.27 a share 23 days from its next earnings release.
For Cummins, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $5.16 is +2.16%.
TSLA and CMI's positive ESP metrics may signal that a positive earnings surprise for both stocks is on the horizon.
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 >>