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 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. Shell (SHEL) holds a Zacks Rank #3 at the moment and its Most Accurate Estimate comes in at $3.31 a share 28 days away from its upcoming earnings release on October 27, 2022.
By taking the percentage difference between the $3.31 Most Accurate Estimate and the $3.03 Zacks Consensus Estimate, Shell has an Earnings ESP of 9.36%.
SHEL is just one of a large group of Oils-Energy stocks with a positive ESP figure. Helmerich & Payne (HP) is another qualifying stock you may want to consider.
Helmerich & Payne is a Zacks Rank #2 (Buy) stock, and is getting ready to report earnings on November 16, 2022. HP's Most Accurate Estimate sits at $0.45 a share 48 days from its next earnings release.
Helmerich & Payne's Earnings ESP figure currently stands at 14.41% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $0.39.
SHEL and HP'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 >>
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
Shell PLC Unsponsored ADR (SHEL) : Free Stock Analysis Report
Helmerich & Payne, Inc. (HP) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research