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How to Find Strong Auto, Tires and Trucks Stocks Slated for Positive Earnings Surprises

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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.

The ability to identify stocks that are likely to top quarterly earnings expectations can be profitable, but it's no simple task. Here at Zacks, our Earnings ESP filter helps make things easier.

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.

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 Oshkosh?

The final step today is to look at a stock that meets our ESP qualifications. Oshkosh (OSK - Free Report) earns a #1 (Strong Buy) 27 days from its next quarterly earnings release on October 26, 2023, and its Most Accurate Estimate comes in at $2.37 a share.

Oshkosh's Earnings ESP sits at +8.36%, which, as explained above, is calculated by taking the percentage difference between the $2.37 Most Accurate Estimate and the Zacks Consensus Estimate of $2.19. OSK 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.

OSK is one of just a large database of Auto, Tires and Trucks stocks with positive ESPs. Another solid-looking stock is Paccar (PCAR - Free Report) .

Paccar, which is readying to report earnings on October 24, 2023, sits at a Zacks Rank #3 (Hold) right now. It's Most Accurate Estimate is currently $2.13 a share, and PCAR is 25 days out from its next earnings report.

Paccar's Earnings ESP figure currently stands at +3.34% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $2.06.

OSK and PCAR'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:

PACCAR Inc. (PCAR) - free report >>

Oshkosh Corporation (OSK) - free report >>

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