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How to Find Strong Medical Stocks Slated for Positive Earnings Surprises
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Earnings are arguably the most important single number on a company's quarterly financial report. Wall Street clearly dives into all of the other metrics and management's input, but the EPS figure helps cut through all the noise.
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.
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.
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 #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 Zoetis?
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. Zoetis (ZTS - Free Report) earns a #3 (Hold) right now and its Most Accurate Estimate sits at $1.34 a share, just four days from its upcoming earnings release on February 13, 2024.
ZTS has an Earnings ESP figure of +0.21%, which, as explained above, is calculated by taking the percentage difference between the $1.34 Most Accurate Estimate and the Zacks Consensus Estimate of $1.33. Zoetis 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.
ZTS is just one of a large group of Medical stocks with a positive ESP figure. HCA Healthcare (HCA - Free Report) is another qualifying stock you may want to consider.
HCA Healthcare, which is readying to report earnings on April 19, 2024, sits at a Zacks Rank #1 (Strong Buy) right now. It's Most Accurate Estimate is currently $4.91 a share, and HCA is 70 days out from its next earnings report.
The Zacks Consensus Estimate for HCA Healthcare is $4.89, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +0.38%.
ZTS and HCA'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 Medical Stocks Slated for Positive Earnings Surprises
Earnings are arguably the most important single number on a company's quarterly financial report. Wall Street clearly dives into all of the other metrics and management's input, but the EPS figure helps cut through all the noise.
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.
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.
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 #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 Zoetis?
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. Zoetis (ZTS - Free Report) earns a #3 (Hold) right now and its Most Accurate Estimate sits at $1.34 a share, just four days from its upcoming earnings release on February 13, 2024.
ZTS has an Earnings ESP figure of +0.21%, which, as explained above, is calculated by taking the percentage difference between the $1.34 Most Accurate Estimate and the Zacks Consensus Estimate of $1.33. Zoetis 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.
ZTS is just one of a large group of Medical stocks with a positive ESP figure. HCA Healthcare (HCA - Free Report) is another qualifying stock you may want to consider.
HCA Healthcare, which is readying to report earnings on April 19, 2024, sits at a Zacks Rank #1 (Strong Buy) right now. It's Most Accurate Estimate is currently $4.91 a share, and HCA is 70 days out from its next earnings report.
The Zacks Consensus Estimate for HCA Healthcare is $4.89, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +0.38%.
ZTS and HCA'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 >>