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.
2 Stocks to Add to Your Watchlist
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. 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.
The last thing we will do today, now that we have a grasp on the ESP and how powerful of a tool it can be, is to look at a qualifying stock. Estee Lauder (EL) holds a Zacks Rank #3 at the moment and its Most Accurate Estimate comes in at $1.44 a share 27 days away from its upcoming earnings release on November 1, 2022.
Estee Lauder's Earnings ESP sits at 8.05%, which, as explained above, is calculated by taking the percentage difference between the $1.44 Most Accurate Estimate and the Zacks Consensus Estimate of $1.33.
EL is just one of a large group of Consumer Staples stocks with a positive ESP figure. Archer Daniels Midland (ADM) is another qualifying stock you may want to consider.
Archer Daniels Midland is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on October 25, 2022. ADM's Most Accurate Estimate sits at $1.42 a share 20 days from its next earnings release.
Archer Daniels Midland's Earnings ESP figure currently stands at 2.6% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $1.38.
EL and ADM'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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The Estee Lauder Companies Inc. (EL) : Free Stock Analysis Report
Archer Daniels Midland Company (ADM) : Free Stock Analysis Report
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