In the end, earnings and interest rates are the two main variables that dictate stock values. Though they have no say over the latter, investors can keep an eye on quarterly earnings reports.
While earnings reports are obviously important, the relative performance of a company's bottom line relative to expectations can have an even greater impact on stock prices, particularly in the short term. So, investors should consider jumping on these earnings shocks while they happen.
The Expected Surprise Prediction (ESP) of Zacks Earnings is designed to identify earnings surprises by analyzing the most current analyst revisions. The underlying idea is that analysts usually have new knowledge that might make their earnings estimate more accurate, so if they revise it before the earnings announcement, it bodes well
The Expected Surprise Prediction is the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate, which is the central component of the ESP model.
Now that we know what an ESP is and how useful it can be, we can delve into a stock that meets the criteria right now. Just thirty days before its results release on April 25, 2024, Amazon (AMZN) commands a Zacks Rank #2 and a Most Accurate Estimate of $0.88 per share.
The Earnings ESP for AMZN is 8.64%, which is determined by subtracting $0.81 from the Zacks Consensus Estimate and adding $0.88 to the Most Accurate Estimate, as previously mentioned. Just a small number of stocks in the Retail-Wholesale sector have positive ESPs, and AMZN is among them. Walmart (WMT) is another stock that seems to be doing well.
On May 16, 2024, Walmart is scheduled to release its earnings, and the stock is now ranked #3 (Hold) by Zacks. Fifty-one days before its next earnings report, WMT has a Most Accurate Estimate of $0.52 per share.
There is a 0.43% discrepancy between Walmart's Most Accurate Estimate and the $0.52 Zacks Consensus Estimate. It is possible that the positive ESP measures for AMZN and WMT indicate that both firms are about to have an earnings surprise.
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