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.
We know earnings results are vital, but how a company performs compared to bottom line expectations can be even more important when it comes to stock prices, especially in the near-term. This means that investors might want to take advantage of these 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. Kellogg (K) earns a Zacks Rank #3 right now and its Most Accurate Estimate sits at $0.87 a share, just seven days from its upcoming earnings release on February 9, 2023.
K has an Earnings ESP figure of 4.12%, which, as explained above, is calculated by taking the percentage difference between the $0.87 Most Accurate Estimate and the Zacks Consensus Estimate of $0.84.
K is one of just a large database of Consumer Staples stocks with positive ESPs. Another solid-looking stock is Mondelez (MDLZ).
Mondelez is a Zacks Rank #2 (Buy) stock, and is getting ready to report earnings on April 25, 2023. MDLZ's Most Accurate Estimate sits at $0.82 a share 82 days from its next earnings release.
Mondelez's Earnings ESP figure currently stands at 1.19% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $0.81.
Because both stocks hold a positive Earnings ESP, K and MDLZ 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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