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.
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.
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 Blink Charging?
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. Blink Charging (BLNK) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at -$0.22 a share 29 days away from its upcoming earnings release on May 14, 2024.
BLNK has an Earnings ESP figure of +19.27%, which, as explained above, is calculated by taking the percentage difference between the -$0.22 Most Accurate Estimate and the Zacks Consensus Estimate of -$0.27. Blink Charging 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.
BLNK is one of just a large database of Computer and Technology stocks with positive ESPs. Another solid-looking stock is Palo Alto Networks (PANW).
Palo Alto Networks, which is readying to report earnings on May 28, 2024, sits at a Zacks Rank #3 (Hold) right now. It's Most Accurate Estimate is currently $1.26 a share, and PANW is 43 days out from its next earnings report.
The Zacks Consensus Estimate for Palo Alto Networks is $1.26, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +0.34%.
BLNK and PANW's positive ESP metrics may signal that a positive earnings surprise for both stocks is on the horizon.
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 Computer and Technology 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.
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.
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 Blink Charging?
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. Blink Charging (BLNK) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at -$0.22 a share 29 days away from its upcoming earnings release on May 14, 2024.
BLNK has an Earnings ESP figure of +19.27%, which, as explained above, is calculated by taking the percentage difference between the -$0.22 Most Accurate Estimate and the Zacks Consensus Estimate of -$0.27. Blink Charging 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.
BLNK is one of just a large database of Computer and Technology stocks with positive ESPs. Another solid-looking stock is Palo Alto Networks (PANW).
Palo Alto Networks, which is readying to report earnings on May 28, 2024, sits at a Zacks Rank #3 (Hold) right now. It's Most Accurate Estimate is currently $1.26 a share, and PANW is 43 days out from its next earnings report.
The Zacks Consensus Estimate for Palo Alto Networks is $1.26, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +0.34%.
BLNK and PANW's positive ESP metrics may signal that a positive earnings surprise for both stocks is on the horizon.
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 >>