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, 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.
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. Natera (NTRA) earns a Zacks Rank #2 right now and its Most Accurate Estimate sits at -$0.16 a share, just 13 days from its upcoming earnings release on February 26, 2025.
NTRA has an Earnings ESP figure of 61.91%, which, as explained above, is calculated by taking the percentage difference between the -$0.16 Most Accurate Estimate and the Zacks Consensus Estimate of -$0.42.
NTRA is one of just a large database of Medical stocks with positive ESPs. Another solid-looking stock is Moderna (MRNA).
Slated to report earnings on February 14, 2025, Moderna holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is -$2.65 a share one day from its next quarterly update.
The Zacks Consensus Estimate for Moderna is -$2.69, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of 1.37%.
NTRA and MRNA's 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 >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Natera, Inc. (NTRA) : Free Stock Analysis Report
Moderna, Inc. (MRNA) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.