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.
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 final step today is to look at a stock that meets our ESP qualifications. RH (RH) earns a Zacks Rank #3 one day from its next quarterly earnings release on December 8, 2022, and its Most Accurate Estimate comes in at $4.72 a share.
RH's Earnings ESP sits at 0.41%, which, as explained above, is calculated by taking the percentage difference between the $4.72 Most Accurate Estimate and the Zacks Consensus Estimate of $4.70.
RH is just one of a large group of Consumer Staples stocks with a positive ESP figure. Procter & Gamble (PG) is another qualifying stock you may want to consider.
Slated to report earnings on January 18, 2023, Procter & Gamble holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is $1.58 a share 42 days from its next quarterly update.
Procter & Gamble's Earnings ESP figure currently stands at 0.25% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $1.57.
Because both stocks hold a positive Earnings ESP, RH and PG 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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