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How to Find Strong Construction Stocks Slated for Positive Earnings Surprises

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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.

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.

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.

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 #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 Martin Marietta?

Now that we understand what the ESP is and how beneficial it can be, let's dive into a stock that currently fits the bill. Martin Marietta (MLM - Free Report) earns a #2 (Buy) right now and its Most Accurate Estimate sits at $4.85 a share, just one day from its upcoming earnings release on July 27, 2023.

By taking the percentage difference between the $4.85 Most Accurate Estimate and the $4.83 Zacks Consensus Estimate, Martin Marietta has an Earnings ESP of +0.41%. Investors should also know that MLM 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.

MLM is just one of a large group of Construction stocks with a positive ESP figure. Howmet (HWM - Free Report) is another qualifying stock you may want to consider.

Howmet, which is readying to report earnings on August 1, 2023, sits at a Zacks Rank #2 (Buy) right now. It's Most Accurate Estimate is currently $0.44 a share, and HWM is six days out from its next earnings report.

The Zacks Consensus Estimate for Howmet is $0.43, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +1.99%.

Because both stocks hold a positive Earnings ESP, MLM and HWM 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


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


Martin Marietta Materials, Inc. (MLM) - free report >>

Howmet Aerospace Inc. (HWM) - free report >>

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