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.
The earnings figure itself is key, but a beat or miss on the bottom line can sometimes be just as, if not more, important. Therefore, investors should consider paying close attention to these earnings surprises, as a big beat can help a stock climb even higher.
2 Stocks to Add to Your Watchlist
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. The core of the ESP model is comparing the Most Accurate Estimate to the Zacks Consensus Estimate, where the resulting percentage difference between the two equals the Expected Surprise Prediction.
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. AMC Entertainment (AMC) earns a Zacks Rank #3 right now and its Most Accurate Estimate sits at -$0.16 a share, just 28 days from its upcoming earnings release on March 7, 2023.
By taking the percentage difference between the -$0.16 Most Accurate Estimate and the -$0.20 Zacks Consensus Estimate, AMC Entertainment has an Earnings ESP of 18.65%.
AMC is just one of a large group of Consumer Discretionary stocks with a positive ESP figure. Nike (NKE) is another qualifying stock you may want to consider.
Nike, which is readying to report earnings on March 20, 2023, sits at a Zacks Rank #2 (Buy) right now. It's Most Accurate Estimate is currently $0.54 a share, and NKE is 41 days out from its next earnings report.
For Nike, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $0.51 is 6.3%.
AMC and NKE'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 >>
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