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.
Life and the stock market are both about expectations, and rising above what is expected is often rewarded, while falling short can come with negative consequences. Investors might want to try to capture stronger returns by finding positive earnings surprises.
2 Stocks to Add to Your Watchlist
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. With this in mind, the Expected Surprise Prediction compares the Most Accurate Estimate (being the most recent) against the overall Zacks Consensus Estimate. The percentage difference provides the ESP figure.
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 look at a qualifying stock. Ameriprise Financial Services (AMP) holds a Zacks Rank #3 at the moment and its Most Accurate Estimate comes in at $7.26 a share 11 days away from its upcoming earnings release on April 24, 2023.
By taking the percentage difference between the $7.26 Most Accurate Estimate and the $7.16 Zacks Consensus Estimate, Ameriprise Financial Services has an Earnings ESP of 1.5%.
AMP is part of a big group of Finance stocks that boast a positive ESP, and investors may want to take a look at Ventas (VTR) as well.
Ventas is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on May 4, 2023. VTR's Most Accurate Estimate sits at $0.70 a share 21 days from its next earnings release.
For Ventas, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $0.70 is 0.41%.
AMP and VTR'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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