Back to top

Image: Bigstock

The Most Accurate Way to Predict Earnings This Quarter

Read MoreHide Full Article

“At the end of the day, all stock price movements can be traced back to earnings.”

Read that last line again…so it sticks!

It’s true because when investors buy shares in a stock they are actually buying part ownership in that company. And owners of companies, big and small, are always focused on the same thing…making money! In the stock market, we call that earnings.

With earnings being of such great importance, it means earnings season is prime time for investors. If the companies you own have good news, then their stocks will immediately jump higher. Yes, even in the midst of a bear rally. Unfortunately, if your companies disappoint, they will gap down HARD and you will be handed stiff losses. Especially in a market like this where so many stocks are beating their earnings expectations.

Not surprisingly investors have long sought a reliable “whisper number” they could use before companies report earnings. Truly, this would be the Holy Grail of investing. With that information in hand, an investor would have a portfolio that lights up like a Christmas Tree every earnings season.

Our research team has spent many long years in the hunt for this coveted whisper number and it is with great pleasure that I can say: WE FOUND IT!!!

Below I will detail what we discovered and better yet, how you can profit from these whispers this earnings season…and every earnings season thereafter.

More . . .


4 Stocks to Buy BEFORE They Report Earnings

Next week 701 companies are set to report earnings. What if you could know in advance which 4 look to rock Wall Street and pop in price?

Now you can. Two of these stocks just posted. Two more will be added shortly.

Zacks' proprietary "ESP" formula predicts positive earnings surprises with unthinkable 79.41% accuracy. This has led to double-digit gains in less than 1 week.

Your chance for access closes at midnight Sunday, July 21.

See Surprise Stocks now >>


Pushing Ahead When All Others Have Failed

Nobody understands earnings data more than Len Zacks. Remember he is the one who uncovered the power of earnings estimate revisions that is the cornerstone of the Zacks Rank for stocks and its +24.8% average annual return.

So several years ago, our executives met with him to start this project to find a reliable earnings whisper number. He told us not to waste our time.

Why? He cited numerous such projects undertaken by other leading researchers over the years. Each time they tried and failed.

In fact he shared with us his previous efforts that also ended in futility. He said emphatically:

“I can tell you with 70% accuracy which stocks are more likely to beat estimates. But beating estimates and the share price moving higher are two very different things.”

Certainly you know what he’s saying. How many times have you owned a stock that supposedly beat estimates and yet the price went down afterwards? (Too many times is the answer...we’ve all been there).

They pleaded with him to try once again. He begrudgingly accepted the challenge with the help of others here at Zacks, like Kevin Matras, who have developed many of our most profitable trading strategies.

There was very little success early on. None of the new theories were panning out. Yet the toughest part was to get sufficient new data points in place to test. When this new class of earnings data was finally installed, then things got real interesting.

The Discovery of These “Whispers”

What finally got us on the right track was going back to the basics of the earnings estimate philosophy at the heart of the Zacks Rank. Here are the clues:

• Earnings estimates come from brokerage firm stock analysts.

• These analysts are highly motivated to create conservative estimates that can easily be beat. Why? If they have a Buy rating on a stock, and the estimates are too high, then the stock is more likely to disappoint. This would send the stock price lower and the performance on their stock ratings would be poor (leading to lower compensation).

• The closer to earnings season we get, the more accurate the information that goes into the estimate.

Add it all up and there is no good reason for an analyst to create a higher estimate close to the date of the earnings report unless they had a DARN GOOD REASON. Focusing in on those estimates closest to the earnings announcement is where we found the “whisper that becomes a scream”…a clear indication from the analyst community about specific stocks more likely to beat earnings by a wide margin. And most importantly, rise on that news.

Where to Find Such Stocks

I can’t share all the details of the secret formula with you, but our system relies on two under-utilized signals coming from the brokerage analyst community. These two whispers are then layered on top of other time-tested elements such as the Zacks Rank and Zacks Industry Rank to find only the best stocks… in the best industries… with the best chances of beating earnings and quickly rising in price.

If you would like to receive our precise whisper trading signals through the heart of this earnings season, I invite you to check out our Zacks Surprise Trader.

This is the time to do it. Right now, "Positive Surprise" signals are flashing for 4 companies that are reporting earnings this coming week. Here's the timeline:

- Deadline to get into the portfolio is midnight Sunday, July 21.

- One new surprise stock was posted Thursday, another on Friday, and 2 more will be posted Monday morning.

- These companies report earnings this coming Tuesday and Thursday.

Don't miss your chance to beat Wall Street to the punch and make the most of the potential double-digit price pops. Our signals predict big positive surprises and they've been right nearly 80% of the time.

Another reason to look into this right away is that you are also invited to download our just-released "Early Warning Alert" report. It reveals Stocks to SELL Before They Report Earnings in the Coming Week. Our strategy works both ways, and you can use this report to avoid companies that are likely to report negative surprises from July 22 through July 26.

See our Surprise Trader stocks now >>

Wishing you great financial success,


Dave Bartosiak is Zacks' resident earnings surprise expert. He selects stocks and delivers daily commentary for our Surprise Trader portfolio.