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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.
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 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.
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. Dream Finders Homes Inc. (DFH) earns a Zacks Rank #2 right now and its Most Accurate Estimate sits at $0.72 a share, just 13 days from its upcoming earnings release on May 1, 2025.
DFH has an Earnings ESP figure of 19.01%, which, as explained above, is calculated by taking the percentage difference between the $0.72 Most Accurate Estimate and the Zacks Consensus Estimate of $0.61.
DFH is one of just a large database of Construction stocks with positive ESPs. Another solid-looking stock is Martin Marietta (MLM).
Slated to report earnings on April 29, 2025, Martin Marietta holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is $1.92 a share 11 days from its next quarterly update.
The Zacks Consensus Estimate for Martin Marietta is $1.84, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of 4.48%.
DFH and MLM's positive ESP figures tell us that both stocks have a good chance at beating analyst expectations in their next earnings report.
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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