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.
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.
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. RTX (RTX) earns a Zacks Rank #3 right now and its Most Accurate Estimate sits at $1.34 a share, just 29 days from its upcoming earnings release on October 22, 2024.
By taking the percentage difference between the $1.34 Most Accurate Estimate and the $1.33 Zacks Consensus Estimate, RTX has an Earnings ESP of 0.86%.
RTX is part of a big group of Aerospace stocks that boast a positive ESP, and investors may want to take a look at Virgin Galactic (SPCE) as well.
Virgin Galactic is a Zacks Rank #2 (Buy) stock, and is getting ready to report earnings on November 13, 2024. SPCE's Most Accurate Estimate sits at -$3.58 a share 51 days from its next earnings release.
Virgin Galactic's Earnings ESP figure currently stands at 12.58% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of -$4.10.
Because both stocks hold a positive Earnings ESP, RTX and SPCE could potentially post earnings beats in their next reports.
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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