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.
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.
The ability to identify stocks that are likely to top quarterly earnings expectations can be profitable, but it’s no simple task. Here at Zacks, our Earnings ESP filter helps make things easier.
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 ranking of #3 (Hold), or 60% of all stocks covered by the Zacks Rank, are expected to perform in-line with the broader market. Stocks with rankings of #2 (Buy) and #1 (Strong Buy), 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 Deere?
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. Deere (DE – Free Report) earns a #3 (Hold) right now and its Most Accurate Estimate sits at $3.18 a share, just seven days from its upcoming earnings release on February 13, 2025.
Deere’s Earnings ESP sits at +1.12%, which, as explained above, is calculated by taking the percentage difference between the $3.18 Most Accurate Estimate and the Zacks Consensus Estimate of $3.14. DE is also part of a large group of stocks that boast a positive ESP. Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they’ve reported.
DE is one of just a large database of Industrial Products stocks with positive ESPs. Another solid-looking stock is Stanley Black & Decker (SWK – Free Report) .
Stanley Black & Decker is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on May 1, 2025. SWK’s Most Accurate Estimate sits at $0.97 a share 84 days from its next earnings release.
Stanley Black & Decker’s Earnings ESP figure currently stands at +1.01% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $0.96.
Because both stocks hold a positive Earnings ESP, DE and SWK 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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