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How to Boost Your Portfolio with Top Finance Stocks Set to Beat Earnings
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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.
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 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.
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 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 Realty Income Corp.
The final step today is to look at a stock that meets our ESP qualifications. Realty Income Corp. (O - Free Report) earns a #3 (Hold) 12 days from its next quarterly earnings release on February 20, 2024, and its Most Accurate Estimate comes in at $1.05 a share.
O has an Earnings ESP figure of +2.8%, which, as explained above, is calculated by taking the percentage difference between the $1.05 Most Accurate Estimate and the Zacks Consensus Estimate of $1.02. Realty Income Corp. is one of a large database 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.
O is part of a big group of Finance stocks that boast a positive ESP, and investors may want to take a look at Capital Southwest (CSWC - Free Report) as well.
Capital Southwest, which is readying to report earnings on May 27, 2024, sits at a Zacks Rank #3 (Hold) right now. It's Most Accurate Estimate is currently $0.66 a share, and CSWC is 109 days out from its next earnings report.
The Zacks Consensus Estimate for Capital Southwest is $0.66, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +0.51%.
O and CSWC'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 Boost Your Portfolio with Top Finance Stocks Set to Beat Earnings
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.
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 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.
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 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 Realty Income Corp.
The final step today is to look at a stock that meets our ESP qualifications. Realty Income Corp. (O - Free Report) earns a #3 (Hold) 12 days from its next quarterly earnings release on February 20, 2024, and its Most Accurate Estimate comes in at $1.05 a share.
O has an Earnings ESP figure of +2.8%, which, as explained above, is calculated by taking the percentage difference between the $1.05 Most Accurate Estimate and the Zacks Consensus Estimate of $1.02. Realty Income Corp. is one of a large database 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.
O is part of a big group of Finance stocks that boast a positive ESP, and investors may want to take a look at Capital Southwest (CSWC - Free Report) as well.
Capital Southwest, which is readying to report earnings on May 27, 2024, sits at a Zacks Rank #3 (Hold) right now. It's Most Accurate Estimate is currently $0.66 a share, and CSWC is 109 days out from its next earnings report.
The Zacks Consensus Estimate for Capital Southwest is $0.66, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +0.51%.
O and CSWC'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 >>