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.
The earnings figure itself is key, but a beat or miss on the bottom line can sometimes be just as, if not more, important. Therefore, investors should consider paying close attention to these earnings surprises, as a big beat can help a stock climb even higher.
2 Stocks to Add to Your Watchlist
The Zacks Expected Surprise Prediction, or ESP, works by locking in on the most up-to-date analyst earnings revisions because they can be more accurate than estimates from weeks or even months before the actual release date. The thinking is pretty straightforward: analysts who provide earnings estimates closer to the report are likely to have more information. With this in mind, the Expected Surprise Prediction compares the Most Accurate Estimate (being the most recent) against the overall Zacks Consensus Estimate. The percentage difference provides the ESP figure.
The final step today is to look at a stock that meets our ESP qualifications. Visa (V) earns a Zacks Rank #3 one day from its next quarterly earnings release on January 26, 2023, and its Most Accurate Estimate comes in at $2.02 a share.
Visa's Earnings ESP sits at 0.77%, which, as explained above, is calculated by taking the percentage difference between the $2.02 Most Accurate Estimate and the Zacks Consensus Estimate of $2.
V is one of just a large database of Business Services stocks with positive ESPs. Another solid-looking stock is Avis Budget Group (CAR).
Slated to report earnings on February 13, 2023, Avis Budget Group holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is $7.35 a share 19 days from its next quarterly update.
The Zacks Consensus Estimate for Avis Budget Group is $6.66, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of 10.36%.
Because both stocks hold a positive Earnings ESP, V and CAR could potentially post earnings beats in their next reports.
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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