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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.
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.
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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.
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. Humana (HUM) holds a Zacks Rank #3 at the moment and its Most Accurate Estimate comes in at $10.04 a share one day away from its upcoming earnings release on April 30, 2025.
By taking the percentage difference between the $10.04 Most Accurate Estimate and the $9.98 Zacks Consensus Estimate, Humana has an Earnings ESP of 0.57%.
HUM is one of just a large database of Medical stocks with positive ESPs. Another solid-looking stock is AbbVie (ABBV).
AbbVie, which is readying to report earnings on July 24, 2025, sits at a Zacks Rank #3 (Hold) right now. It's Most Accurate Estimate is currently $3.13 a share, and ABBV is 86 days out from its next earnings report.
For AbbVie, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $3.11 is 0.83%.
HUM and ABBV'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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Humana Inc. (HUM) : Free Stock Analysis Report
AbbVie Inc. (ABBV) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).