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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.
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 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.
With this in mind, the Expected Surprise Prediction compares the Most Accurate Estimate (being the most recent) against the overall Zacks Consensus Estimate. The percentage difference provides the ESP figure. The system also utilizes our core Zacks Rank to provide a stronger system for identifying stocks that might beat their next quarterly earnings estimate and possibly see the stock price climb.
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 ranking of #3 (Hold), or 60% of all stocks covered by the Zacks Rank, are expected to perform in-line with the broader market. Stocks with rankings of #2 (Buy) and #1 (Strong Buy), 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 RLI Corp.
The final step today is to look at a stock that meets our ESP qualifications. RLI Corp. (RLI - Free Report) earns a #3 (Hold) one day from its next quarterly earnings release on January 24, 2024, and its Most Accurate Estimate comes in at $1.65 a share.
RLI Corp.'s Earnings ESP sits at +14.39%, which, as explained above, is calculated by taking the percentage difference between the $1.65 Most Accurate Estimate and the Zacks Consensus Estimate of $1.44. RLI 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.
RLI is one of just a large database of Finance stocks with positive ESPs. Another solid-looking stock is BlackRock (BLK - Free Report) .
BlackRock is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on April 12, 2024. BLK's Most Accurate Estimate sits at $9.29 a share 80 days from its next earnings release.
For BlackRock, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $9.18 is +1.18%.
RLI and BLK'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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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.
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 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.
With this in mind, the Expected Surprise Prediction compares the Most Accurate Estimate (being the most recent) against the overall Zacks Consensus Estimate. The percentage difference provides the ESP figure. The system also utilizes our core Zacks Rank to provide a stronger system for identifying stocks that might beat their next quarterly earnings estimate and possibly see the stock price climb.
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 ranking of #3 (Hold), or 60% of all stocks covered by the Zacks Rank, are expected to perform in-line with the broader market. Stocks with rankings of #2 (Buy) and #1 (Strong Buy), 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 RLI Corp.
The final step today is to look at a stock that meets our ESP qualifications. RLI Corp. (RLI - Free Report) earns a #3 (Hold) one day from its next quarterly earnings release on January 24, 2024, and its Most Accurate Estimate comes in at $1.65 a share.
RLI Corp.'s Earnings ESP sits at +14.39%, which, as explained above, is calculated by taking the percentage difference between the $1.65 Most Accurate Estimate and the Zacks Consensus Estimate of $1.44. RLI 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.
RLI is one of just a large database of Finance stocks with positive ESPs. Another solid-looking stock is BlackRock (BLK - Free Report) .
BlackRock is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on April 12, 2024. BLK's Most Accurate Estimate sits at $9.29 a share 80 days from its next earnings release.
For BlackRock, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $9.18 is +1.18%.
RLI and BLK'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 >>