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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.
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 is more formally known as the Expected Surprise Prediction, and it aims to grab the inside track on the latest analyst estimate revisions ahead of a company's report. The idea is relatively intuitive as a newer projection might be based on more complete information. The ESP is calculated by comparing the Most Accurate Estimate to the Zacks Consensus Estimate, with the percentage difference between the two giving us the Zacks 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. Quanta Services (PWR) earns a Zacks Rank #3 right now and its Most Accurate Estimate sits at $2.65 a share, just 10 days from its upcoming earnings release on February 20, 2025.
Quanta Services' Earnings ESP sits at 0.46%, which, as explained above, is calculated by taking the percentage difference between the $2.65 Most Accurate Estimate and the Zacks Consensus Estimate of $2.64.
PWR is part of a big group of Construction stocks that boast a positive ESP, and investors may want to take a look at Frontdoor (FTDR) as well.
Frontdoor is a Zacks Rank #2 (Buy) stock, and is getting ready to report earnings on February 27, 2025. FTDR's Most Accurate Estimate sits at $0.18 a share 17 days from its next earnings release.
The Zacks Consensus Estimate for Frontdoor is $0.11, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of 60%.
PWR and FTDR'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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