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These 2 Medical Stocks Could Beat Earnings: Why They Should Be on Your Radar
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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.
We know earnings results are vital, but how a company performs compared to bottom line expectations can be even more important when it comes to stock prices, especially in the near-term. This means that investors might want to take advantage of these 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 Earnings ESP is more formally known as the Expected Surprise Prediction, and it aims to grab the inside track on the latest analyst estimate revisions ahead of a company's report. The idea is relatively intuitive as a newer projection might be based on more complete information.
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.
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 Merck?
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. Merck (MRK - Free Report) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at -$0.05 a share seven days away from its upcoming earnings release on February 1, 2024.
By taking the percentage difference between the -$0.05 Most Accurate Estimate and the -$0.09 Zacks Consensus Estimate, Merck has an Earnings ESP of +41.75%. Investors should also know that MRK 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.
MRK is part of a big group of Medical stocks that boast a positive ESP, and investors may want to take a look at Axsome Therapeutics (AXSM - Free Report) as well.
Slated to report earnings on February 20, 2024, Axsome Therapeutics holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is -$1.20 a share 26 days from its next quarterly update.
Axsome Therapeutics' Earnings ESP figure currently stands at +0.51% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of -$1.21.
MRK and AXSM'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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These 2 Medical Stocks Could Beat Earnings: Why They Should Be on Your Radar
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.
We know earnings results are vital, but how a company performs compared to bottom line expectations can be even more important when it comes to stock prices, especially in the near-term. This means that investors might want to take advantage of these 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 Earnings ESP is more formally known as the Expected Surprise Prediction, and it aims to grab the inside track on the latest analyst estimate revisions ahead of a company's report. The idea is relatively intuitive as a newer projection might be based on more complete information.
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.
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 Merck?
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. Merck (MRK - Free Report) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at -$0.05 a share seven days away from its upcoming earnings release on February 1, 2024.
By taking the percentage difference between the -$0.05 Most Accurate Estimate and the -$0.09 Zacks Consensus Estimate, Merck has an Earnings ESP of +41.75%. Investors should also know that MRK 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.
MRK is part of a big group of Medical stocks that boast a positive ESP, and investors may want to take a look at Axsome Therapeutics (AXSM - Free Report) as well.
Slated to report earnings on February 20, 2024, Axsome Therapeutics holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is -$1.20 a share 26 days from its next quarterly update.
Axsome Therapeutics' Earnings ESP figure currently stands at +0.51% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of -$1.21.
MRK and AXSM'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 >>