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.
The earnings figure itself is key, of course, but a beat or miss on the bottom line can sometimes be just as, if not more, important. Therefore, investors should consider paying close attention to these earnings surprises, as a big beat can help a stock climb and vice versa.
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.
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.
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 Mr Cooper?
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. Mr Cooper (COOP) earns a #3 (Hold) right now and its Most Accurate Estimate sits at $2.15 a share, just nine days from its upcoming earnings release on April 24, 2024.
COOP has an Earnings ESP figure of +1.9%, which, as explained above, is calculated by taking the percentage difference between the $2.15 Most Accurate Estimate and the Zacks Consensus Estimate of $2.11. Mr Cooper 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.
COOP is one of just a large database of Finance stocks with positive ESPs. Another solid-looking stock is Equinix (EQIX).
Equinix, which is readying to report earnings on May 1, 2024, sits at a Zacks Rank #3 (Hold) right now. It's Most Accurate Estimate is currently $8.69 a share, and EQIX is 16 days out from its next earnings report.
The Zacks Consensus Estimate for Equinix is $8.66, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +0.3%.
Because both stocks hold a positive Earnings ESP, COOP and EQIX 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 >>
Image: Bigstock
How to Boost Your Portfolio with Top Finance Stocks Set to Beat Earnings
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.
The earnings figure itself is key, of course, but a beat or miss on the bottom line can sometimes be just as, if not more, important. Therefore, investors should consider paying close attention to these earnings surprises, as a big beat can help a stock climb and vice versa.
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.
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.
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 Mr Cooper?
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. Mr Cooper (COOP) earns a #3 (Hold) right now and its Most Accurate Estimate sits at $2.15 a share, just nine days from its upcoming earnings release on April 24, 2024.
COOP has an Earnings ESP figure of +1.9%, which, as explained above, is calculated by taking the percentage difference between the $2.15 Most Accurate Estimate and the Zacks Consensus Estimate of $2.11. Mr Cooper 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.
COOP is one of just a large database of Finance stocks with positive ESPs. Another solid-looking stock is Equinix (EQIX).
Equinix, which is readying to report earnings on May 1, 2024, sits at a Zacks Rank #3 (Hold) right now. It's Most Accurate Estimate is currently $8.69 a share, and EQIX is 16 days out from its next earnings report.
The Zacks Consensus Estimate for Equinix is $8.66, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +0.3%.
Because both stocks hold a positive Earnings ESP, COOP and EQIX 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 >>