Maximize Your Investment Returns: Discover These 2 Finance Stocks Set to Surpass Earnings Estimates

When it comes to evaluating a company's quarterly financial performance, earnings per share (EPS) is a critical number. While investors certainly analyze other metrics and insights from management, the EPS stands out as a clear indicator of a company's profitability.

Focusing on whether a company beats or misses its earnings expectations can also significantly impact stock prices. Surprises in earnings—whether positive or negative—often lead to considerable movements in the stock market. Therefore, being aware of potential earnings surprises is essential for investors looking to enhance their portfolios.

Identifying companies that are likely to exceed their quarterly earnings estimates is a widely practiced strategy among investors. One effective approach for achieving this is to utilize the Zacks Earnings ESP (Earnings Surprise Prediction) tool.

Understanding the Zacks Earnings ESP

The Zacks Earnings ESP helps investors by focusing on the most recent analyst earnings revisions, which are likely to be more accurate than earlier estimates provided weeks or months before the earnings report. The rationale behind this is simple: analysts tend to have access to better information as the report date approaches.

The core of the Earnings ESP model involves comparing the Most Accurate Estimate of earnings to the Zacks Consensus Estimate. The percentage difference between these two figures establishes the Earnings Surprise Prediction. To enhance the strategy, the Zacks Rank is also integrated into the ESP metric, enabling investors to identify companies expected to surpass their earnings expectations, ultimately leading to a potential increase in share prices.

When a positive Earnings ESP aligns with a Zacks Rank of #3 (Hold) or higher, stocks have shown a tendency to report positive earnings surprises 70% of the time. Additionally, this combination has yielded an average annual return of 28.3%, based on a 10-year backtest.

It's important to note that around 60% of stocks fall into the #3 (Hold) category, suggesting they are likely to perform in line with market averages. In contrast, stocks rated #2 (Buy) and #1 (Strong Buy) fall within the top 15% and top 5% of stocks, respectively, indicating superior performance compared to the broader market, especially for Strong Buy stocks.

Highlighting Prologis (PLD)

Next, let’s investigate a stock that meets our Earnings ESP criteria. Prologis (PLD) holds a Zacks Rank of #3 (Hold) and is just 19 days away from its quarterly earnings report, scheduled for January 21, 2025. The Most Accurate Estimate for PLD stands at $1.39 per share.

The Earnings ESP for Prologis is +0.51%, which is computed by determining the percentage difference between the Most Accurate Estimate of $1.39 and the Zacks Consensus Estimate of $1.38. Prologis is one among many finance stocks with positive ESPs, and using the Earnings ESP Filter can help investors identify even more promising stocks in this category.

Another notable finance stock with a positive ESP is CME Group (CME). Set to release its earnings on February 12, 2025, CME currently maintains a Zacks Rank of #2 (Buy). The Most Accurate Estimate for CME is $2.62 per share, with 41 days remaining until its earnings report.

CME Group's Earnings ESP stands at +5.28%, derived from the percentage difference between its Most Accurate Estimate and the Zacks Consensus Estimate of $2.49.

Given that both Prologis and CME Group boast positive Earnings ESP figures, these stocks are well-positioned to potentially exceed earnings expectations in their upcoming reports.

How to Find Ideal Stocks for Your Portfolio

For investors seeking stocks with a high likelihood of delivering positive earnings surprises, the Zacks Earnings ESP Filter is a valuable tool. This filter can help identify stocks to buy or sell before earnings reports are released, enabling strategic trading during earnings seasons.

investment, stocks, earnings