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.
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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. Avis Budget Group (CAR) earns a Zacks Rank #3 right now and its Most Accurate Estimate sits at $3.85 a share, just five days from its upcoming earnings release on May 1, 2023.
By taking the percentage difference between the $3.85 Most Accurate Estimate and the $3.42 Zacks Consensus Estimate, Avis Budget Group has an Earnings ESP of 12.63%.
CAR is part of a big group of Business Services stocks that boast a positive ESP, and investors may want to take a look at Block (SQ) as well.
Slated to report earnings on May 4, 2023, Block holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is $0.34 a share eight days from its next quarterly update.
Block's Earnings ESP figure currently stands at 7.75% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $0.31.
CAR and SQ'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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