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.
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.
The final step today is to look at a stock that meets our ESP qualifications. Cardinal Health (CAH) earns a Zacks Rank #2 28 days from its next quarterly earnings release on May 1, 2025, and its Most Accurate Estimate comes in at $2.16 a share.
By taking the percentage difference between the $2.16 Most Accurate Estimate and the $2.15 Zacks Consensus Estimate, Cardinal Health has an Earnings ESP of 0.47%.
CAH is part of a big group of Medical stocks that boast a positive ESP, and investors may want to take a look at Eli Lilly (LLY) as well.
Slated to report earnings on May 1, 2025, Eli Lilly holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is $4.67 a share 28 days from its next quarterly update.
The Zacks Consensus Estimate for Eli Lilly is $4.64, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of 0.61%.
CAH and LLY'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 >>
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Cardinal Health, Inc. (CAH) : Free Stock Analysis Report
Eli Lilly and Company (LLY) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
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