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How to Find Strong Business Services Stocks Slated for Positive Earnings Surprises

Quarterly financial reports play a vital role on Wall Street, as they help investors see how a company has performed and what might be coming down the road in the near-term. And out of all of the metrics and results to consider, earnings is one of the most important.

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 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.

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Now that we understand what the ESP is and how beneficial it can be, let's dive into a stock that currently fits the bill. MasterCard (MA) earns a Zacks Rank #3 right now and its Most Accurate Estimate sits at $3.24 a share, just nine days from its upcoming earnings release on May 1, 2024.

By taking the percentage difference between the $3.24 Most Accurate Estimate and the $3.22 Zacks Consensus Estimate, MasterCard has an Earnings ESP of 0.39%.

MA is part of a big group of Business Services stocks that boast a positive ESP, and investors may want to take a look at Arm Holdings (ARM) as well.

Arm Holdings, which is readying to report earnings on May 8, 2024, sits at a Zacks Rank #2 (Buy) right now. It's Most Accurate Estimate is currently $0.32 a share, and ARM is 16 days out from its next earnings report.

The Zacks Consensus Estimate for Arm Holdings is $0.30, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of 5.26%.

MA and ARM's positive ESP figures tell us that both stocks have a good chance at beating analyst expectations in their next earnings report.

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 >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Mastercard Incorporated (MA) : Free Stock Analysis Report

ARM Holdings PLC Sponsored ADR (ARM) : Free Stock Analysis Report

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Zacks Investment Research