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.
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.
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. Dell Technologies (DELL) holds a Zacks Rank #2 at the moment and its Most Accurate Estimate comes in at $2.06 a share 26 days away from its upcoming earnings release on November 26, 2024.
Dell Technologies’ Earnings ESP sits at 0.38%, which, as explained above, is calculated by taking the percentage difference between the $2.06 Most Accurate Estimate and the Zacks Consensus Estimate of $2.05.
DELL is just one of a large group of Computer and Technology stocks with a positive ESP figure. Salesforce.com (CRM) is another qualifying stock you may want to consider.
Salesforce.com, which is readying to report earnings on December 4, 2024, sits at a Zacks Rank #2 (Buy) right now. It’s Most Accurate Estimate is currently $2.43 a share, and CRM is 34 days out from its next earnings report.
The Zacks Consensus Estimate for Salesforce.com is $2.43, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of 0.12%.
Because both stocks hold a positive Earnings ESP, DELL and CRM 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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