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How to Find Strong Finance Stocks Slated for Positive Earnings Surprises
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Wall Street watches a company's quarterly report closely to understand as much as possible about its recent performance and what to expect going forward. Of course, one figure often stands out among the rest: earnings.
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 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.
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.
Bringing together a positive earnings ESP alongside a Zacks Rank #3 (Hold) or better has helped stocks report a positive earnings surprise 70% of the time. Furthermore, by using these parameters, investors have seen 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 Blackstone Inc.
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. Blackstone Inc. (BX - Free Report) earns a #3 (Hold) right now and its Most Accurate Estimate sits at $1.03 a share, just 30 days from its upcoming earnings release on April 18, 2024.
Blackstone Inc.'s Earnings ESP sits at +3.43%, which, as explained above, is calculated by taking the percentage difference between the $1.03 Most Accurate Estimate and the Zacks Consensus Estimate of $1. BX 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.
BX is one of just a large database of Finance stocks with positive ESPs. Another solid-looking stock is Western Alliance (WAL - Free Report) .
Western Alliance is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on April 16, 2024. WAL's Most Accurate Estimate sits at $1.87 a share 28 days from its next earnings release.
The Zacks Consensus Estimate for Western Alliance is $1.71, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +9.64%.
Because both stocks hold a positive Earnings ESP, BX and WAL 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
Wall Street watches a company's quarterly report closely to understand as much as possible about its recent performance and what to expect going forward. Of course, one figure often stands out among the rest: earnings.
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 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.
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.
Bringing together a positive earnings ESP alongside a Zacks Rank #3 (Hold) or better has helped stocks report a positive earnings surprise 70% of the time. Furthermore, by using these parameters, investors have seen 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 Blackstone Inc.
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. Blackstone Inc. (BX - Free Report) earns a #3 (Hold) right now and its Most Accurate Estimate sits at $1.03 a share, just 30 days from its upcoming earnings release on April 18, 2024.
Blackstone Inc.'s Earnings ESP sits at +3.43%, which, as explained above, is calculated by taking the percentage difference between the $1.03 Most Accurate Estimate and the Zacks Consensus Estimate of $1. BX 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.
BX is one of just a large database of Finance stocks with positive ESPs. Another solid-looking stock is Western Alliance (WAL - Free Report) .
Western Alliance is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on April 16, 2024. WAL's Most Accurate Estimate sits at $1.87 a share 28 days from its next earnings release.
The Zacks Consensus Estimate for Western Alliance is $1.71, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +9.64%.
Because both stocks hold a positive Earnings ESP, BX and WAL 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 >>