Wall Street watches a company's quarterly report closely to understand as much as possible about its recent performance and what to expect going forward. Of course, one figure often stands out among the rest: earnings.
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.
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. Harley-Davidson (HOG) holds a Zacks Rank #3 at the moment and its Most Accurate Estimate comes in at $1.45 a share 19 days away from its upcoming earnings release on October 26, 2022.
By taking the percentage difference between the $1.45 Most Accurate Estimate and the $1.44 Zacks Consensus Estimate, Harley-Davidson has an Earnings ESP of 0.6%.
HOG is one of just a large database of Auto-Tires-Trucks stocks with positive ESPs. Another solid-looking stock is Goodyear (GT).
Goodyear is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on November 4, 2022. GT's Most Accurate Estimate sits at $0.63 a share 28 days from its next earnings release.
The Zacks Consensus Estimate for Goodyear is $0.61, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of 4.13%.
HOG and GT'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 >>
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HarleyDavidson, Inc. (HOG) : Free Stock Analysis Report
The Goodyear Tire & Rubber Company (GT) : Free Stock Analysis Report
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