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How to Find Strong Finance 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.
The earnings figure itself is key, of course, but a beat or miss on the bottom line can sometimes be just as, if not more, important. Therefore, investors should consider paying close attention to these earnings surprises, as a big beat can help a stock climb and vice versa.
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.
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 Allstate?
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. Allstate (ALL - Free Report) earns a #3 (Hold) right now and its Most Accurate Estimate sits at $3.49 a share, just 26 days from its upcoming earnings release on February 7, 2024.
Allstate's Earnings ESP sits at +12.14%, which, as explained above, is calculated by taking the percentage difference between the $3.49 Most Accurate Estimate and the Zacks Consensus Estimate of $3.11. ALL 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.
ALL is just one of a large group of Finance stocks with a positive ESP figure. Host Hotels (HST - Free Report) is another qualifying stock you may want to consider.
Host Hotels, which is readying to report earnings on February 21, 2024, sits at a Zacks Rank #3 (Hold) right now. It's Most Accurate Estimate is currently $0.43 a share, and HST is 40 days out from its next earnings report.
For Host Hotels, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $0.41 is +4.37%.
Because both stocks hold a positive Earnings ESP, ALL and HST 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 >>
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How to Find Strong Finance Stocks Slated for Positive Earnings Surprises
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.
The earnings figure itself is key, of course, but a beat or miss on the bottom line can sometimes be just as, if not more, important. Therefore, investors should consider paying close attention to these earnings surprises, as a big beat can help a stock climb and vice versa.
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.
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 Allstate?
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. Allstate (ALL - Free Report) earns a #3 (Hold) right now and its Most Accurate Estimate sits at $3.49 a share, just 26 days from its upcoming earnings release on February 7, 2024.
Allstate's Earnings ESP sits at +12.14%, which, as explained above, is calculated by taking the percentage difference between the $3.49 Most Accurate Estimate and the Zacks Consensus Estimate of $3.11. ALL 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.
ALL is just one of a large group of Finance stocks with a positive ESP figure. Host Hotels (HST - Free Report) is another qualifying stock you may want to consider.
Host Hotels, which is readying to report earnings on February 21, 2024, sits at a Zacks Rank #3 (Hold) right now. It's Most Accurate Estimate is currently $0.43 a share, and HST is 40 days out from its next earnings report.
For Host Hotels, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $0.41 is +4.37%.
Because both stocks hold a positive Earnings ESP, ALL and HST 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 >>