U.S. Markets open in 2 hrs 7 mins
  • S&P Futures

    4,547.75
    +23.50 (+0.52%)
     
  • Dow Futures

    35,062.00
    +152.00 (+0.44%)
     
  • Nasdaq Futures

    15,167.25
    +133.75 (+0.89%)
     
  • Russell 2000 Futures

    2,069.00
    +9.80 (+0.48%)
     
  • Crude Oil

    86.76
    -0.20 (-0.23%)
     
  • Gold

    1,839.50
    -3.70 (-0.20%)
     
  • Silver

    24.27
    +0.04 (+0.16%)
     
  • EUR/USD

    1.1337
    -0.0010 (-0.0907%)
     
  • 10-Yr Bond

    1.8270
    0.0000 (0.00%)
     
  • Vix

    23.07
    +0.28 (+1.23%)
     
  • GBP/USD

    1.3606
    -0.0006 (-0.0449%)
     
  • USD/JPY

    114.3020
    -0.0510 (-0.0446%)
     
  • BTC-USD

    42,033.39
    -68.00 (-0.16%)
     
  • CMC Crypto 200

    998.26
    +3.51 (+0.35%)
     
  • FTSE 100

    7,586.36
    -3.30 (-0.04%)
     
  • Nikkei 225

    27,772.93
    +305.70 (+1.11%)
     

Here's How Investors Can Find Strong Basic Materials Stocks with the Zacks ESP Screener

  • Oops!
    Something went wrong.
    Please try again later.
·3 min read
In this article:
  • Oops!
    Something went wrong.
    Please try again later.

Two factors often determine stock prices in the long run: earnings and interest rates. Investors can't control the latter, but they can focus on a company's earnings results every quarter.

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, 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.

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.

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 Westlake Chemical?

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. Westlake Chemical (WLK) earns a #3 (Hold) right now and its Most Accurate Estimate sits at $4.20 a share, just 28 days from its upcoming earnings release on November 2, 2021.

By taking the percentage difference between the $4.20 Most Accurate Estimate and the $3.91 Zacks Consensus Estimate, Westlake Chemical has an Earnings ESP of 7.51%. Investors should also know that WLK is just one of a large group of stocks with positive ESPs. All of these qualifying stocks can be filtered by ESP, Zacks Rank, % Surprise (Last Qtr.), and Reporting date.

Now that you know how to use the Zacks Earnings ESP to your advantage, make sure to check out the Earnings ESP Home Page for even more earnings related strategies to create a winning portfolio.

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 >>


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Westlake Chemical Corporation (WLK) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.