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.
Hunting for ‘earnings whispers’ or companies poised to beat their quarterly earnings estimates is a somewhat common practice. But that doesn’t make it easy. One way that has been proven to work is by using the Zacks Earnings ESP tool.
The Zacks Earnings ESP, Explained
The Zacks Earnings ESP is more formally known as the Expected Surprise Prediction, and it aims to grab the inside track on the latest analyst estimate revisions ahead of a company’s report. The idea is relatively intuitive as a newer projection might be based on more complete information.
With this in mind, the Expected Surprise Prediction compares the Most Accurate Estimate (being the most recent) against the overall Zacks Consensus Estimate. The percentage difference provides the ESP figure. The system also utilizes our core Zacks Rank to provide a stronger system for identifying stocks that might beat their next quarterly earnings estimate and possibly see the stock price climb.
Bringing together a positive earnings ESP alongside a Zacks Rank #3 (Hold) or better has helped stocks report a positive earnings surprise 70% of the time. Furthermore, by using these parameters, investors have seen 28.3% annual returns on average, according to our 10 year backtest.
Stocks with a #3 (Hold) ranking, which is most stocks covered at 60%, are expected to perform in-line with the broader market. But stocks that fall into the #2 (Buy) and #1 (Strong Buy) ranking, or the top 15% and top 5% of stocks, respectively, should outperform the market. Strong Buy stocks should outperform more than any other rank.
Should You Consider Progressive?
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. Progressive (PGR – Free Report) earns a #3 (Hold) right now and its Most Accurate Estimate sits at $3.58 a share, just 13 days from its upcoming earnings release on January 22, 2025.
PGR has an Earnings ESP figure of +4.03%, which, as explained above, is calculated by taking the percentage difference between the $3.58 Most Accurate Estimate and the Zacks Consensus Estimate of $3.44. Progressive is one of a large database of stocks with positive ESPs. Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they’ve reported.
PGR is part of a big group of Finance stocks that boast a positive ESP, and investors may want to take a look at Palomar (PLMR – Free Report) as well.
Slated to report earnings on February 12, 2025, Palomar holds a #2 (Buy) ranking on the Zacks Rank, and it’s Most Accurate Estimate is $1.24 a share 34 days from its next quarterly update.
For Palomar, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $1.24 is +0.27%.
PGR and PLMR’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 >>
Financial Market Newsflash
No financial news published today. Check back later.
