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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.
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 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. Lockheed Martin (LMT) earns a Zacks Rank #3 right now and its Most Accurate Estimate sits at $6.65 a share, just six days from its upcoming earnings release on January 28, 2025.
By taking the percentage difference between the $6.65 Most Accurate Estimate and the $6.52 Zacks Consensus Estimate, Lockheed Martin has an Earnings ESP of 1.98%.
LMT is just one of a large group of Aerospace stocks with a positive ESP figure. RTX (RTX) is another qualifying stock you may want to consider.
RTX is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on January 28, 2025. RTX's Most Accurate Estimate sits at $1.39 a share six days from its next earnings release.
The Zacks Consensus Estimate for RTX is $1.37, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of 1.38%.
LMT and RTX'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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