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.
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, 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. The core of the ESP model is comparing the Most Accurate Estimate to the Zacks Consensus Estimate, where the resulting percentage difference between the two equals the Expected Surprise Prediction.
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. General Dynamics (GD) holds a Zacks Rank #3 at the moment and its Most Accurate Estimate comes in at $2.64 a share 21 days away from its upcoming earnings release on April 26, 2023.
GD has an Earnings ESP figure of 0.54%, which, as explained above, is calculated by taking the percentage difference between the $2.64 Most Accurate Estimate and the Zacks Consensus Estimate of $2.62.
GD is just one of a large group of Aerospace stocks with a positive ESP figure. Virgin Galactic (SPCE) is another qualifying stock you may want to consider.
Virgin Galactic is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on May 4, 2023. SPCE's Most Accurate Estimate sits at -$0.47 a share 29 days from its next earnings release.
For Virgin Galactic, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of -$0.50 is 6.75%.
GD and SPCE's positive ESP metrics may signal that a positive earnings surprise for both stocks is on the horizon.
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