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.
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. Colgate-Palmolive (CL) holds a Zacks Rank #3 at the moment and its Most Accurate Estimate comes in at $0.89 a share seven days away from its upcoming earnings release on October 25, 2024.
Colgate-Palmolive's Earnings ESP sits at 0.96%, which, as explained above, is calculated by taking the percentage difference between the $0.89 Most Accurate Estimate and the Zacks Consensus Estimate of $0.88.
CL is one of just a large database of Consumer Staples stocks with positive ESPs. Another solid-looking stock is BRF (BRFS).
BRF, which is readying to report earnings on November 11, 2024, sits at a Zacks Rank #1 (Strong Buy) right now. It's Most Accurate Estimate is currently $0.15 a share, and BRFS is 24 days out from its next earnings report.
BRF's Earnings ESP figure currently stands at 15.39% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $0.13.
CL and BRFS' positive ESP metrics may signal that a positive earnings surprise for both stocks is on the horizon.
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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