The second week of earnings season continues to give me mixed
emotions. On one hand you have cautious outlooks coming from
about 60% of companies and yet on the other there are some strong
relative numbers sending stocks mostly higher. These
conflicting messages can make trading extremely difficult.
It's not just about the "number" itself
Tech bellwether Intel downgraded its growth outlook for the
remainder of the year and AMD was a train wreck, but yet bank
earnings have been relatively strong, with Bank of America, Goldman
Sachs and J.P. Morgan all beating estimates. Even IBM and
eBay beat estimates.
Our Research Director Sheraz Mian noted that total earnings for
the 52 companies that have reported results as of Wednesday morning
were down 2.3% from the same period last year.
The bottom line is that companies are making LESS money, but
stocks have been climbing over the past week; further proving that
expectation is really the key to finding a stock that not only
surprises, but rallies. If a company under-promises and
over-delivers, you have a recipe for a rally, even if they are
making less than they did a year ago.
The secret to targeting the best companies is to not only find
the candidates that are under-promising, but those that are most
likely to over-deliver. Analysts can help us identify these
targets and the Zacks ESP reading is the perfect place to
About Zacks Earnings ESP
Earnings ESP is Zacks' proprietary methodology for determining
which stocks have the best chance to surprise with their next
earnings announcement. The Earnings ESP shows the percentage
difference between the Most Accurate Estimate and the
The Zacks ESP helps predict earnings surprises to the upside and
downside; the greater the ESP (positive or negative) the greater
the likelihood for a surprise.
I use ESP to help quantify the conviction of the analysts for a
surprise and stack the odds in my favor when I combine it with
other measurements and statistics.
This can work for bullish potential surprises (positive ESP) as
well as bearish surprises (negative ESP).
Let's check out a few bullish ESP candidates that report over
the next week or so:
Bullish ESP Stocks
) is a Zacks Rank 3 stock with an earnings ESP of 200%. The
Zacks consensus estimate is for 1.00, with the most accurate
estimate at $2.00. They have managed to exceed analysts'
expectations by an average of 29% over the past four quarters.
Zipcar is the largest car sharing company in the world and
recently expanded operations into China. They are growing in
dense urban areas and around colleges where demand is
- Zipcar report earnings on July 16th AMC (after market
Read Analyst Details Here
Capital City Bank (
) is a Zacks Rank 2 stock with an earnings ESP of 190%. The
Zacks consensus estimate is for 1.90, with the most accurate
estimate at $3.61. Captial City has exceeded analysts'
expectations by an average of 14% over the past four quarters.
Capital City is a financial holding company engaged in the
commercial and retail banking business, including accepting demand,
savings and time deposits; extending credit; originating
residential mortgage loans; and providing data processing services,
asset management services, trust services, retail brokerage
services and a broad range of other financial services to corporate
and individual customers, governmental entities and correspondent
- Capital City Bank report earnings on July 18th BMO (before
Read Analyst Details Here
KKR & Co. L.P. (
) is a Zacks Rank 2 stock with an earnings ESP of 50%. The
Zacks consensus estimate is for Q2 EPS of $0.12, with the most
accurate estimate at $0.18. KKR actually missed estimates 3
of the last four reports, but managed a 43% upside surprise last
It's interesting to me that estimates are generally lower than
they were 90 days ago and yet the stock is basically flat in that
same time frame. This tells me that there are higher expectations
for the stock and it may need to beat just to stay flat.
Kohlberg Kravis Roberts & Co. provides a range of asset
management services to its investors and provides capital markets
services to its firm, its portfolio companies and its clients. The
Company operates private equity funds that take either controlling
or strategic minority ownership positions for long-term
appreciation; invests in leveraged loans, high-yield bonds and less
liquid credit products; and, on behalf of portfolio companies,
arranges equity and debt financing and offers capital market
- KKR & Co reports earnings on July 27th BMO.
Read Analyst Details Here
If this method sounds intriguing to you for improving your
. Not only do I use Earnings ESP but I also include some other
critical factors to create the "secret sauce" I use to achieve
77.96% accuracy in identifying positive earnings surprises … before
Learn more about
Senior Equities Strategist, Jared Levy, is the editor of
and can show you how to use the power of Zacks Earnings ESP and
earnings surprises for timely, steady gains.
CAPITAL CITY BK (CCBG): Free Stock Analysis
INTL BUS MACH (IBM): Free Stock Analysis Report
KKR & CO LP (KKR): Free Stock Analysis
ZIPCAR INC (ZIP): Free Stock Analysis Report
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