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These 2 Oils and Energy Stocks Could Beat Earnings: Why They Should Be on Your Radar

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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.

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 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.

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 Halliburton?

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. Halliburton (HAL - Free Report) earns a #3 (Hold) right now and its Most Accurate Estimate sits at $0.75 a share, just 28 days from its upcoming earnings release on April 23, 2024.

HAL has an Earnings ESP figure of +0.81%, which, as explained above, is calculated by taking the percentage difference between the $0.75 Most Accurate Estimate and the Zacks Consensus Estimate of $0.74. Halliburton 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.

HAL is part of a big group of Oils and Energy stocks that boast a positive ESP, and investors may want to take a look at Civitas Resources (CIVI - Free Report) as well.

Slated to report earnings on May 1, 2024, Civitas Resources holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is $2.52 a share 36 days from its next quarterly update.

The Zacks Consensus Estimate for Civitas Resources is $2.49, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +0.98%.

HAL and CIVI'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 >>


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


Halliburton Company (HAL) - free report >>

Civitas Resources, Inc. (CIVI) - free report >>

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