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 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. 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 final step today is to look at a stock that meets our ESP qualifications. United States Steel (X) earns a Zacks Rank #3 27 days from its next quarterly earnings release on April 27, 2023, and its Most Accurate Estimate comes in at $0.46 a share.
By taking the percentage difference between the $0.46 Most Accurate Estimate and the $0.39 Zacks Consensus Estimate, United States Steel has an Earnings ESP of 16.17%.
X is one of just a large database of Basic Materials stocks with positive ESPs. Another solid-looking stock is Nucor (NUE).
Nucor is a Zacks Rank #1 (Strong Buy) stock, and is getting ready to report earnings on April 20, 2023. NUE's Most Accurate Estimate sits at $4.03 a share 20 days from its next earnings release.
The Zacks Consensus Estimate for Nucor is $3.90, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of 3.25%.
Because both stocks hold a positive Earnings ESP, X and NUE 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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