Earnings are arguably the most important single number on a company's quarterly financial report. Wall Street clearly dives into all of the other metrics and management's input, but the EPS figure helps cut through all the noise.
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. Teladoc (TDOC) holds a Zacks Rank #3 at the moment and its Most Accurate Estimate comes in at -$0.47 a share 30 days away from its upcoming earnings release on October 26, 2022.
Teladoc's Earnings ESP sits at 20.24%, which, as explained above, is calculated by taking the percentage difference between the -$0.47 Most Accurate Estimate and the Zacks Consensus Estimate of -$0.58.
TDOC is part of a big group of Medical stocks that boast a positive ESP, and investors may want to take a look at Shockwave Medical (SWAV) as well.
Slated to report earnings on November 14, 2022, Shockwave Medical holds a #1 (Strong Buy) ranking on the Zacks Rank, and it's Most Accurate Estimate is $0.68 a share 49 days from its next quarterly update.
The Zacks Consensus Estimate for Shockwave Medical is $0.68, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of 0.3%.
Because both stocks hold a positive Earnings ESP, TDOC and SWAV 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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Teladoc Health, Inc. (TDOC) : Free Stock Analysis Report
ShockWave Medical, Inc. (SWAV) : Free Stock Analysis Report
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