Earnings are arguably the most important single number on a company's quarterly financial report. Wall Street clearly dives into all of the other metrics and management's input, but the EPS figure helps cut through all the noise.
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 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. Dell Technologies (DELL) earns a Zacks Rank #3 right now and its Most Accurate Estimate sits at $1.68 a share, just 21 days from its upcoming earnings release on August 25, 2022.
Dell Technologies' Earnings ESP sits at 3.07%, which, as explained above, is calculated by taking the percentage difference between the $1.68 Most Accurate Estimate and the Zacks Consensus Estimate of $1.63.
DELL is just one of a large group of Computer and Technology stocks with a positive ESP figure. Arista Networks (ANET) is another qualifying stock you may want to consider.
Arista Networks is a Zacks Rank #2 (Buy) stock, and is getting ready to report earnings on November 7, 2022. ANET's Most Accurate Estimate sits at $1.03 a share 95 days from its next earnings release.
For Arista Networks, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $0.95 is 8%.
Because both stocks hold a positive Earnings ESP, DELL and ANET could potentially post earnings beats in their next reports.
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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