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.
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.
The Zacks Expected Surprise Prediction, or ESP, works by locking in on the most up-to-date analyst earnings revisions because they can be more accurate than estimates from weeks or even months before the actual release date. The thinking is pretty straightforward: analysts who provide earnings estimates closer to the report are likely to have more information. With this in mind, the Expected Surprise Prediction compares the Most Accurate Estimate (being the most recent) against the overall Zacks Consensus Estimate. The percentage difference provides the ESP figure.
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. RH (RH) earns a Zacks Rank #3 right now and its Most Accurate Estimate sits at $2.71 a share, just 30 days from its upcoming earnings release on December 5, 2024.
RH's Earnings ESP sits at 1.31%, which, as explained above, is calculated by taking the percentage difference between the $2.71 Most Accurate Estimate and the Zacks Consensus Estimate of $2.68.
RH is one of just a large database of Consumer Staples stocks with positive ESPs. Another solid-looking stock is Freshpet (FRPT).
Freshpet is a Zacks Rank #2 (Buy) stock, and is getting ready to report earnings on February 24, 2025. FRPT's Most Accurate Estimate sits at $0.47 a share 111 days from its next earnings release.
Freshpet's Earnings ESP figure currently stands at 11.36% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $0.42.
RH and FRPT's positive ESP figures tell us that both stocks have a good chance at beating analyst expectations in their next earnings report.
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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