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 final step today is to look at a stock that meets our ESP qualifications. Cintas (CTAS) earns a Zacks Rank #2 14 days from its next quarterly earnings release on September 27, 2023, and its Most Accurate Estimate comes in at $3.71 a share.
CTAS has an Earnings ESP figure of 1.61%, which, as explained above, is calculated by taking the percentage difference between the $3.71 Most Accurate Estimate and the Zacks Consensus Estimate of $3.65.
CTAS is just one of a large group of Industrial Products stocks with a positive ESP figure. Johnson Controls (JCI) is another qualifying stock you may want to consider.
Slated to report earnings on November 2, 2023, Johnson Controls holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is $1.10 a share 50 days from its next quarterly update.
The Zacks Consensus Estimate for Johnson Controls is $1.10, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of 0.33%.
Because both stocks hold a positive Earnings ESP, CTAS and JCI 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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