Wall Street watches a company's quarterly report closely to understand as much as possible about its recent performance and what to expect going forward. Of course, one figure often stands out among the rest: earnings.
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. McCormick (MKC) earns a Zacks Rank #2 right now and its Most Accurate Estimate sits at $0.59 a share, just 22 days from its upcoming earnings release on June 29, 2023.
By taking the percentage difference between the $0.59 Most Accurate Estimate and the $0.56 Zacks Consensus Estimate, McCormick has an Earnings ESP of 4.61%.
MKC is part of a big group of Consumer Staples stocks that boast a positive ESP, and investors may want to take a look at Corteva, Inc. (CTVA) as well.
Slated to report earnings on August 3, 2023, Corteva, Inc. holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is $1.66 a share 57 days from its next quarterly update.
The Zacks Consensus Estimate for Corteva, Inc. is $1.65, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of 0.63%.
Because both stocks hold a positive Earnings ESP, MKC and CTVA 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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