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.
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. Cardinal Health (CAH) earns a Zacks Rank #2 right now and its Most Accurate Estimate sits at $1.75 a share, just 16 days from its upcoming earnings release on January 30, 2025.
By taking the percentage difference between the $1.75 Most Accurate Estimate and the $1.74 Zacks Consensus Estimate, Cardinal Health has an Earnings ESP of 0.42%.
CAH is one of just a large database of Medical stocks with positive ESPs. Another solid-looking stock is Editas Medicine (EDIT).
Editas Medicine is a Zacks Rank #2 (Buy) stock, and is getting ready to report earnings on February 26, 2025. EDIT's Most Accurate Estimate sits at -$0.07 a share 43 days from its next earnings release.
Editas Medicine's Earnings ESP figure currently stands at 78.6% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of -$0.30.
CAH and EDIT's positive ESP figures tell us that both stocks have a good chance at beating analyst expectations in their next earnings report.
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 >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Cardinal Health, Inc. (CAH) : Free Stock Analysis Report
Editas Medicine, Inc. (EDIT) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.