Two factors often determine stock prices in the long run: earnings and interest rates. Investors can't control the latter, but they can focus on a company's earnings results every quarter.
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 final step today is to look at a stock that meets our ESP qualifications. Dick's Sporting Goods (DKS) earns a Zacks Rank #3 12 days from its next quarterly earnings release on May 23, 2023, and its Most Accurate Estimate comes in at $3.32 a share.
DKS has an Earnings ESP figure of 4.43%, which, as explained above, is calculated by taking the percentage difference between the $3.32 Most Accurate Estimate and the Zacks Consensus Estimate of $3.18.
DKS is part of a big group of Retail-Wholesale stocks that boast a positive ESP, and investors may want to take a look at Alibaba (BABA) as well.
Alibaba is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on May 18, 2023. BABA's Most Accurate Estimate sits at $1.35 a share seven days from its next earnings release.
The Zacks Consensus Estimate for Alibaba is $1.30, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of 4.25%.
DKS and BABA'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 >>
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