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These 2 Basic Materials 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.

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 Earnings ESP, or Expected Surprise Prediction, aims to find earnings surprises by focusing on the most recent analyst revisions. The basic premise is that if an analyst reevaluates their earnings estimate ahead of an earnings release, it means they likely have new information that could possibly be more accurate.

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.

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.

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 Carpenter Technology?

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. Carpenter Technology (CRS - Free Report) earns a #1 (Strong Buy) right now and its Most Accurate Estimate sits at $1.55 a share, just 30 days from its upcoming earnings release on October 24, 2024.

CRS has an Earnings ESP figure of +6.95%, which, as explained above, is calculated by taking the percentage difference between the $1.55 Most Accurate Estimate and the Zacks Consensus Estimate of $1.45. Carpenter Technology 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.

CRS is just one of a large group of Basic Materials stocks with a positive ESP figure. Hecla Mining (HL - Free Report) is another qualifying stock you may want to consider.

Slated to report earnings on November 4, 2024, Hecla Mining holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is $0.03 a share 41 days from its next quarterly update.

Hecla Mining's Earnings ESP figure currently stands at +20% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $0.03.

CRS and HL'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:


Carpenter Technology Corporation (CRS) - free report >>

Hecla Mining Company (HL) - free report >>

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