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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.
Life and the stock market are both about expectations, and rising above what is expected is often rewarded, while falling short can come with negative consequences. Investors might want to try to capture stronger returns by finding positive earnings surprises.
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. Vertex Pharmaceuticals (VRTX) earns a Zacks Rank #3 right now and its Most Accurate Estimate sits at $4.06 a share, just 11 days from its upcoming earnings release on February 10, 2025.
By taking the percentage difference between the $4.06 Most Accurate Estimate and the $4 Zacks Consensus Estimate, Vertex Pharmaceuticals has an Earnings ESP of 1.63%.
VRTX is just one of a large group of Medical stocks with a positive ESP figure. Natera (NTRA) is another qualifying stock you may want to consider.
Natera is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on February 26, 2025. NTRA's Most Accurate Estimate sits at -$0.16 a share 27 days from its next earnings release.
For Natera, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of -$0.42 is 61.91%.
VRTX and NTRA's positive ESP metrics may signal that a positive earnings surprise for both stocks is on the horizon.
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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Vertex Pharmaceuticals Incorporated (VRTX) : Free Stock Analysis Report