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.
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. Entergy (ETR) holds a Zacks Rank #2 at the moment and its Most Accurate Estimate comes in at $0.64 a share five days away from its upcoming earnings release on February 18, 2025.
Entergy's Earnings ESP sits at 1.19%, which, as explained above, is calculated by taking the percentage difference between the $0.64 Most Accurate Estimate and the Zacks Consensus Estimate of $0.63.
ETR is one of just a large database of Utilities stocks with positive ESPs. Another solid-looking stock is NextEra Energy (NEE).
NextEra Energy is a Zacks Rank #2 (Buy) stock, and is getting ready to report earnings on April 22, 2025. NEE's Most Accurate Estimate sits at $1.01 a share 68 days from its next earnings release.
For NextEra Energy, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $0.99 is 1.18%.
ETR and NEE'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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