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.
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 Expected Surprise Prediction, or ESP, works by locking in on the most up-to-date analyst earnings revisions because they can be more accurate than estimates from weeks or even months before the actual release date. The thinking is pretty straightforward: analysts who provide earnings estimates closer to the report are likely to have more information.
Now that we understand the basic idea, let’s look at how the Expected Surprise Prediction works. The ESP is calculated by comparing the Most Accurate Estimate to the Zacks Consensus Estimate, with the percentage difference between the two giving us the Zacks ESP figure.
When we join a positive earnings ESP with a Zacks Rank #3 (Hold) or stronger, stocks posted a positive bottom-line surprise 70% of the time. Plus, this system saw investors produce roughly 28% annual returns on average, according to our 10 year backtest.
Most stocks, about 60%, fall into the #3 (Hold) category, and they are expected to perform in-line with the broader market. Stocks with a #2 (Buy) and #1 (Strong Buy) rating, or the top 15% and top 5% of stocks, respectively, should outperform the market, with Strong Buy stocks outperforming more than any other rank.
Should You Consider Bank of America?
The final step today is to look at a stock that meets our ESP qualifications. Bank of America (BAC – Free Report) earns a #3 (Hold) five days from its next quarterly earnings release on April 15, 2025, and its Most Accurate Estimate comes in at $0.82 a share.
Bank of America’s Earnings ESP sits at +1.29%, which, as explained above, is calculated by taking the percentage difference between the $0.82 Most Accurate Estimate and the Zacks Consensus Estimate of $0.81. BAC 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.
BAC is one of just a large database of Finance stocks with positive ESPs. Another solid-looking stock is Citigroup (C – Free Report) .
Citigroup is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on April 15, 2025. C’s Most Accurate Estimate sits at $1.84 a share five days from its next earnings release.
The Zacks Consensus Estimate for Citigroup is $1.84, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +0.26%.
BAC and C’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 >>
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