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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.
2 Stocks to Add to Your Watchlist
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. Woodward (WWD) earns a Zacks Rank #3 right now and its Most Accurate Estimate sits at $1.14 a share, just 27 days from its upcoming earnings release on February 3, 2025.
Woodward's Earnings ESP sits at 1.28%, which, as explained above, is calculated by taking the percentage difference between the $1.14 Most Accurate Estimate and the Zacks Consensus Estimate of $1.13.
WWD is just one of a large group of Aerospace stocks with a positive ESP figure. Northrop Grumman (NOC) is another qualifying stock you may want to consider.
Slated to report earnings on January 30, 2025, Northrop Grumman holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is $6.31 a share 23 days from its next quarterly update.
The Zacks Consensus Estimate for Northrop Grumman is $6.24, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of 1.16%.
Because both stocks hold a positive Earnings ESP, WWD and NOC could potentially post earnings beats in their next reports.
Find Stocks to Buy or Sell Before They're Reported
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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