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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.
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.
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.
The last thing we will do today, now that we have a grasp on the ESP and how powerful of a tool it can be, is to look at a qualifying stock. MasterCard (MA) holds a Zacks Rank #3 at the moment and its Most Accurate Estimate comes in at $3.59 a share 28 days away from its upcoming earnings release on May 7, 2025.
MasterCard's Earnings ESP sits at 0.53%, which, as explained above, is calculated by taking the percentage difference between the $3.59 Most Accurate Estimate and the Zacks Consensus Estimate of $3.57.
MA is one of just a large database of Business Services stocks with positive ESPs. Another solid-looking stock is Shift4 Payments (FOUR).
Shift4 Payments is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on May 8, 2025. FOUR's Most Accurate Estimate sits at $0.91 a share 29 days from its next earnings release.
For Shift4 Payments, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $0.76 is 18.63%.
MA and FOUR'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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