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.
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.
Hunting for 'earnings whispers' or companies poised to beat their quarterly earnings estimates is a somewhat common practice. But that doesn't make it easy. One way that has been proven to work is by using the Zacks Earnings ESP tool.
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.
With this in mind, the Expected Surprise Prediction compares the Most Accurate Estimate (being the most recent) against the overall Zacks Consensus Estimate. The percentage difference provides the ESP figure. The system also utilizes our core Zacks Rank to provide a stronger system for identifying stocks that might beat their next quarterly earnings estimate and possibly see the stock price climb.
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 Lam Research?
The last thing we will do today, now that we have a grasp on the ESP and how powerful of a tool it can be, is to quickly look at a qualifying stock. Lam Research (LRCX) holds a #2 (Buy) at the moment and its Most Accurate Estimate comes in at $7.25 a share nine days away from its upcoming earnings release on April 24, 2024.
LRCX has an Earnings ESP figure of +0.26%, which, as explained above, is calculated by taking the percentage difference between the $7.25 Most Accurate Estimate and the Zacks Consensus Estimate of $7.23. Lam Research 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.
LRCX is just one of a large group of Computer and Technology stocks with a positive ESP figure. Super Micro Computer (SMCI) is another qualifying stock you may want to consider.
Super Micro Computer is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on May 7, 2024. SMCI's Most Accurate Estimate sits at $6.94 a share 22 days from its next earnings release.
Super Micro Computer's Earnings ESP figure currently stands at +16.35% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $5.97.
Because both stocks hold a positive Earnings ESP, LRCX and SMCI 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
These 2 Computer and Technology Stocks Could Beat Earnings: Why They Should Be on Your Radar
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.
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.
Hunting for 'earnings whispers' or companies poised to beat their quarterly earnings estimates is a somewhat common practice. But that doesn't make it easy. One way that has been proven to work is by using the Zacks Earnings ESP tool.
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.
With this in mind, the Expected Surprise Prediction compares the Most Accurate Estimate (being the most recent) against the overall Zacks Consensus Estimate. The percentage difference provides the ESP figure. The system also utilizes our core Zacks Rank to provide a stronger system for identifying stocks that might beat their next quarterly earnings estimate and possibly see the stock price climb.
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 Lam Research?
The last thing we will do today, now that we have a grasp on the ESP and how powerful of a tool it can be, is to quickly look at a qualifying stock. Lam Research (LRCX) holds a #2 (Buy) at the moment and its Most Accurate Estimate comes in at $7.25 a share nine days away from its upcoming earnings release on April 24, 2024.
LRCX has an Earnings ESP figure of +0.26%, which, as explained above, is calculated by taking the percentage difference between the $7.25 Most Accurate Estimate and the Zacks Consensus Estimate of $7.23. Lam Research 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.
LRCX is just one of a large group of Computer and Technology stocks with a positive ESP figure. Super Micro Computer (SMCI) is another qualifying stock you may want to consider.
Super Micro Computer is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on May 7, 2024. SMCI's Most Accurate Estimate sits at $6.94 a share 22 days from its next earnings release.
Super Micro Computer's Earnings ESP figure currently stands at +16.35% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $5.97.
Because both stocks hold a positive Earnings ESP, LRCX and SMCI 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 >>