Earnings Season Begins: Huge Moves Ahead
Zacks Investment Research | Oct 13, 2021 01:01AM ET
It is earnings season again!
Earnings season always brings the potential for huge moves in stocks.
This quarter, the name of the game is inflation, as the Federal Reserve takes center stage. The dual mandate of the Fed is price stability and maximum employment. With prices on the rise all round us, it’s beginning to put pressure on the FOMC to taper. Last time that happened, the “taper-tantrum” roiled financial markets. Have stocks now finally strengthened earnings enough to walk on their own two feet?
For several weeks, there has been a rotation into large-cap tech. The old guard of Microsoft (NASDAQ:MSFT), Alphabet (NASDAQ:GOOGL), Amazon (NASDAQ:AMZN) led the way, helping the NASDAQ Composite to all-time highs. Will new money flow into other tech growth stocks? Can value finally come back into popularity?
With the market coming down from all-time highs to key technical support between the 50 and 200-day moving averages, breadth should be much stronger than it is. However, less than half of all stocks right now are trading above their 200-day. That means there are lots of stocks out there that are oversold and well off their highs.
Energy stocks have led the way for the last month, as crude and natural gas prices are skyrocketing. How long can this trend last? Financials stand to benefit from a rise in rates. Could this be the quarter where the big banks finally shine?
All of this means that the dartboard approach is not going to work for you this earnings season. You are going to have to choose your investments wisely.
In the current stock market environment, investors need to focus on companies with the best fundamentals in order to find the big winners this earnings season.
One way to uncover them ahead of time is with our proprietary system called ‘Earnings ESP’ (Expected Surprise Prediction) which can assist you in uncovering these huge winners before they report earnings.
So if you want to increase your odds of success this earnings season—and who wouldn’t, given the market backdrop?—then this is one metric you need to know.
The Crystal Ball (NYSE:BLL) of Earnings Season
While it is impossible to know with complete certainty which stocks will deliver positive surprises this earnings season and which ones will disappoint, our proprietary Earnings ESP system determines which stocks have the best chance to surprise with their next earnings announcement. This method has predicted positive earnings surprises with 80.70% accuracy.
The Earnings ESP is simply the percentage difference between the 'Most Accurate Estimate' and the 'Zacks Consensus Estimate' for a company's upcoming earnings per share number:
Earnings ESP = (Most Accurate Estimate / Zacks Consensus Estimate) -1
Get The News You Want
The most accurate estimate is the consensus of earnings estimates from analysts over the last 30 days. The Zacks Consensus Estimate, on the other hand, takes the consensus of all analysts’ estimates for the quarter, even if that estimate hasn't been revised in three months.
Continued . . .
------------------------------------------------------------------------------------------------------
Zacks Investment Research
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.