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.
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.
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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. Paccar (PCAR) earns a Zacks Rank #1 right now and its Most Accurate Estimate sits at $2.26 a share, just 29 days from its upcoming earnings release on January 24, 2023.
PCAR has an Earnings ESP figure of 1.51%, which, as explained above, is calculated by taking the percentage difference between the $2.26 Most Accurate Estimate and the Zacks Consensus Estimate of $2.22.
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PACCAR Inc. (PCAR) : Free Stock Analysis Report