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.
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.
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. EOG Resources (EOG) holds a Zacks Rank #3 at the moment and its Most Accurate Estimate comes in at $3.03 a share 13 days away from its upcoming earnings release on August 1, 2024.
EOG Resources’ Earnings ESP sits at 0.61%, which, as explained above, is calculated by taking the percentage difference between the $3.03 Most Accurate Estimate and the Zacks Consensus Estimate of $3.01.
EOG is one of just a large database of Oils-Energy stocks with positive ESPs. Another solid-looking stock is Transocean (RIG).
Slated to report earnings on July 31, 2024, Transocean holds a #3 (Hold) ranking on the Zacks Rank, and it’s Most Accurate Estimate is -$0.04 a share 12 days from its next quarterly update.
The Zacks Consensus Estimate for Transocean is -$0.07, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of 41.67%.
EOG and RIG’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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EOG Resources, Inc. (EOG) : Free Stock Analysis Report
Transocean Ltd. (RIG) : Free Stock Analysis Report
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