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.
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. Lam Research (LRCX) earns a Zacks Rank #3 right now and its Most Accurate Estimate sits at $9.55 a share, just 19 days from its upcoming earnings release on October 19, 2022.
Lam Research's Earnings ESP sits at 0.2%, which, as explained above, is calculated by taking the percentage difference between the $9.55 Most Accurate Estimate and the Zacks Consensus Estimate of $9.53.
LRCX is just one of a large group of Computer and Technology stocks with a positive ESP figure. Adobe Systems (ADBE) is another qualifying stock you may want to consider.
Slated to report earnings on December 15, 2022, Adobe Systems holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is $3.50 a share 76 days from its next quarterly update.
For Adobe Systems, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $3.49 is 0.12%.
LRCX and ADBE'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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Lam Research Corporation (LRCX) : Free Stock Analysis Report
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