Quarterly financial reports play a vital role on Wall Street, as they help investors see how a company has performed and what might be coming down the road in the near-term. And out of all of the metrics and results to consider, earnings is one of the most important.
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.
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. Costco (COST) holds a Zacks Rank #3 at the moment and its Most Accurate Estimate comes in at $3.62 a share 14 days away from its upcoming earnings release on December 14, 2023.
By taking the percentage difference between the $3.62 Most Accurate Estimate and the $3.44 Zacks Consensus Estimate, Costco has an Earnings ESP of 5.23%.
COST is just one of a large group of Retail-Wholesale stocks with a positive ESP figure. Starbucks (SBUX) is another qualifying stock you may want to consider.
Slated to report earnings on February 1, 2024, Starbucks holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is $0.96 a share 63 days from its next quarterly update.
For Starbucks, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $0.95 is 0.82%.
COST and SBUX'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 >>
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