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.
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.
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. Carnival (CCL) holds a Zacks Rank #3 at the moment and its Most Accurate Estimate comes in at -$0.34 a share 16 days away from its upcoming earnings release on June 23, 2023.
Carnival's Earnings ESP sits at 2.86%, which, as explained above, is calculated by taking the percentage difference between the -$0.34 Most Accurate Estimate and the Zacks Consensus Estimate of -$0.35.
CCL is just one of a large group of Consumer Discretionary stocks with a positive ESP figure. Endeavor Group (EDR) is another qualifying stock you may want to consider.
Slated to report earnings on August 10, 2023, Endeavor Group holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is $0.41 a share 64 days from its next quarterly update.
For Endeavor Group, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $0.36 is 14.95%.
Because both stocks hold a positive Earnings ESP, CCL and EDR 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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