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Chicago, IL – May 24, 2018 - Stocks in this week’s article Caterpillar Inc. (CAT - Free Report) , Twitter Inc. (TWTR - Free Report) , GATX Corporation (GATX - Free Report) , ABIOMED Inc. (ABMD - Free Report) and Inc. (AMZN - Free Report) .

5 Top-Ranked Stocks Gearing Up for an Earnings Beat

What drives shares or pulls them down after a company comes up with quarterly earnings? It’s not exactly how well a company performed in the recently concluded quarter or exhibited strong growth; it is an earnings beat or a miss which drives the market post release.

This is because investors always intend to position ahead of time and fish for stocks that are likely to come up with an astounding performance. After much deliberation, Wall Street analysts forecast earnings of companies. These estimates act as investment leads.

The Importance of an Earnings Beat

A positive earnings surprise or an earnings beat is typically the case when actual or reported earnings come in above the consensus estimate. Historically, if a company’s earnings manage to beat market expectations, its stock surges post release.

After all, a 20% earnings rise (though it looks good apparently) doesn’t tell you if it is a decelerating growth momentum. If that is the case, the company’s fundamentals are in serious question.

Also, seasonal fluctuations are a vital factor in determining a company’s earnings growth. If a company’s Q1 is seasonally weak and its Q4 is strong, then it is likely to report a sequential decline in earnings in Q1. In such cases, the growth rates are fallacious when it comes to analyzing the true picture of a company.

On the other hand, Wall Street analysts club their insights and the company’s guidance to derive an earnings estimate. Thus, beating this key number is almost equivalent to beating the company’s own expectation as well as the market perception. And if the margin of surprise is big, it typically drives the stock higher right after the release.

How to Find Stocks that Can Beat?

Now, since it is difficult to foretell if a company will beat or miss in the upcoming earnings season, investors can check its earnings surprise history. An impressive track record generally acts as a tailwind, sending the stock higher. It indicates that the company might surpass estimates even in its next release.

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