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Quarterly financial reports play a vital role on Wall Street, as they help investors see how a company has performed and what might be coming down the road in the near-term. And out of all of the metrics and results to consider, earnings is one of the most important.
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 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.
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. Progressive (PGR) holds a Zacks Rank #3 at the moment and its Most Accurate Estimate comes in at $3.51 a share one day away from its upcoming earnings release on January 29, 2025.
PGR has an Earnings ESP figure of 2.24%, which, as explained above, is calculated by taking the percentage difference between the $3.51 Most Accurate Estimate and the Zacks Consensus Estimate of $3.43.
PGR is part of a big group of Finance stocks that boast a positive ESP, and investors may want to take a look at Pebblebrook Hotel (PEB) as well.
Slated to report earnings on February 26, 2025, Pebblebrook Hotel holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is $0.12 a share 29 days from its next quarterly update.
The Zacks Consensus Estimate for Pebblebrook Hotel is $0.12, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of 3.45%.
PGR and PEB'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 >>