How to Find Big Winners This Earnings Season
Zacks Investment Research | Jan 12, 2022 12:29AM ET
It is earnings season again!
Every earnings season brings with it the potential for huge moves. However, this season investors have a lot to chew on. With inflation running rampant and a Federal Reserve that is growing ever more hawkish, the landscape is treacherous.
Tech stocks have been absolutely rocked while there have been unsung heroes coming in strong in off-the-radar industries like the regional banks. The year started with stocks pushing up to all-time highs but there has since been a sharp move back to technical support. That means that the dart-board 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 predicts earnings surprises with more than 80% 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
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.
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