Why They Should Be on Your Radar

Quarterly financial reports play a vital role on Wall Street, as they help investors see how a company has performed and what might be coming down the road in the near-term. And out of all of the metrics and results to consider, earnings is one of the most important.

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 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. Arista Networks (ANET) holds a Zacks Rank #2 at the moment and its Most Accurate Estimate comes in at $2.10 a share 21 days away from its upcoming earnings release on November 7, 2024.

By taking the percentage difference between the $2.10 Most Accurate Estimate and the $2.08 Zacks Consensus Estimate, Arista Networks has an Earnings ESP of 0.96%.

ANET is one of just a large database of Computer and Technology stocks with positive ESPs. Another solid-looking stock is Uber Technologies (UBER).

Uber Technologies is a Zacks Rank #2 (Buy) stock, and is getting ready to report earnings on October 31, 2024. UBER’s Most Accurate Estimate sits at $0.61 a share 14 days from its next earnings release.

The Zacks Consensus Estimate for Uber Technologies is $0.41, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of 50%.

Because both stocks hold a positive Earnings ESP, ANET and UBER could potentially post earnings beats in their next reports.

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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