Two factors often determine share prices over the long term: earnings and interest rates. Investors can’t control the latter, but they can focus on a company’s earnings results each quarter.
Life and the stock market both deal with expectations, and exceeding expectations is often rewarded, while falling below them can have negative consequences. Investors should seek higher returns by encountering upside earnings surprises.
2 stocks to add to your watchlist
More formally known as the expected surprise forecast, the Zacks Earnings ESP aims to track the latest revisions to analyst estimates ahead of a company’s report. The idea is relatively intuitive as a more recent projection may be based on more complete information. 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 number.
The last thing we’re going to do today, once we understand ESP and how powerful it can be, is look at a qualifying stock. Analog Devices (ADI) currently holds a Zacks rank #3 and its most accurate guess is $2.61 per share 11 days before the forthcoming earnings release on November 22, 2022.
Taking the percentage difference between Zacks’ most accurate estimate of $2.61 and consensus estimate of $2.58, Analog Devices has earnings ESP of 1.1%.
ADI is just one of many computer and technology stocks with a positive ESP score. Fortinet (FTNT) is another qualifying stock you might want to consider.
Fortinet is scheduled to report earnings on February 2, 2023 and is ranked #2 (Buy) on the Zacks rank and its most accurate estimate is $0.39 per share 83 days after the next quarterly update.
Fortinet’s earnings ESP number currently stands at 0.88% after accounting for the percentage difference between its most accurate estimate and its Zacks consensus estimate of $0.39.
The positive ESP metrics from ADI and FTNT could indicate that a positive earnings surprise is on the horizon for both stocks.
Find stocks to buy or sell before they’re reported
Use the Zacks Earnings ESP filter to buy or sell stocks with the highest probability of surprising positively or negatively before they are reported to trade for profitable earnings. Check it out here >>
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Analog Devices, Inc. (ADI): Free Stock Research Report
Fortinet, Inc. (FTNT): Free Stock Research Report
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