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.
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 Earnings ESP is more formally known as the Expected Surprise Prediction, and it aims to grab the inside track on the latest analyst estimate revisions ahead of a company's report. The idea is relatively intuitive as a newer projection might be based on more complete information. The ESP is calculated by comparing the Most Accurate Estimate to the Zacks Consensus Estimate, with the percentage difference between the two giving us the Zacks ESP figure.
The final step today is to look at a stock that meets our ESP qualifications. Valero Energy (VLO) earns a Zacks Rank #3 28 days from its next quarterly earnings release on October 26, 2023, and its Most Accurate Estimate comes in at $8.10 a share.
VLO has an Earnings ESP figure of 6.15%, which, as explained above, is calculated by taking the percentage difference between the $8.10 Most Accurate Estimate and the Zacks Consensus Estimate of $7.63.
VLO is one of just a large database of Oils-Energy stocks with positive ESPs. Another solid-looking stock is ConocoPhillips (COP).
ConocoPhillips, which is readying to report earnings on November 2, 2023, sits at a Zacks Rank #3 (Hold) right now. It's Most Accurate Estimate is currently $2.37 a share, and COP is 35 days out from its next earnings report.
The Zacks Consensus Estimate for ConocoPhillips is $2.15, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of 10.14%.
Because both stocks hold a positive Earnings ESP, VLO and COP 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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