Two factors often determine stock prices in the long run: earnings and interest rates. Investors can't control the latter, but they can focus on a company's earnings results every quarter.
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.
2 Stocks to Add to Your Watchlist
The Zacks Earnings ESP is more formally known as the Expected Surprise Prediction, and it aims to grab the inside track on the latest analyst estimate revisions ahead of a company's report. The idea is relatively intuitive as a newer projection might be based on more complete information. 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.
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. RCI Hospitality (RICK) earns a Zacks Rank #2 right now and its Most Accurate Estimate sits at $1.43 a share, just 11 days from its upcoming earnings release on December 13, 2022.
RCI Hospitality's Earnings ESP sits at 5.15%, which, as explained above, is calculated by taking the percentage difference between the $1.43 Most Accurate Estimate and the Zacks Consensus Estimate of $1.36.
RICK is one of just a large database of Consumer Discretionary stocks with positive ESPs. Another solid-looking stock is Hyatt Hotels (H).
Slated to report earnings on February 15, 2023, Hyatt Hotels holds a #2 (Buy) ranking on the Zacks Rank, and it's Most Accurate Estimate is $0.42 a share 75 days from its next quarterly update.
The Zacks Consensus Estimate for Hyatt Hotels is $0.38, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of 11.36%.
RICK and H'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 >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report