How to Boost Your Portfolio with Top Finance Stocks Set to Beat Earnings

Quarterly financial reports play a vital role on Wall Street, as they help investors see how a company has performed and what might be coming down the road in the near-term. And out of all of the metrics and results to consider, earnings is one of the most important.

The earnings figure itself is key, of course, but a beat or miss on the bottom line can sometimes be just as, if not more, important. Therefore, investors should consider paying close attention to these earnings surprises, as a big beat can help a stock climb and vice versa.

The ability to identify stocks that are likely to top quarterly earnings expectations can be profitable, but it's no simple task. Here at Zacks, our Earnings ESP filter helps make things easier.

The Zacks Earnings ESP, Explained

The Zacks Earnings ESP, or Expected Surprise Prediction, aims to find earnings surprises by focusing on the most recent analyst revisions. The basic premise is that if an analyst reevaluates their earnings estimate ahead of an earnings release, it means they likely have new information that could possibly be more accurate.

The core of the ESP model is comparing the Most Accurate Estimate to the Zacks Consensus Estimate, where the resulting percentage difference between the two equals the Expected Surprise Prediction. The Zacks Rank is also factored into the ESP metric to better help find companies that appear poised to top their next bottom-line consensus estimate, which will hopefully help lift the stock price.

In fact, when we combined a Zacks Rank #3 (Hold) or better and a positive Earnings ESP, stocks produced a positive surprise 70% of the time. Perhaps most importantly, using these parameters has helped produce 28.3% annual returns on average, according to our 10 year backtest.

Stocks with a #3 (Hold) ranking, which is most stocks covered at 60%, are expected to perform in-line with the broader market. But stocks that fall into the #2 (Buy) and #1 (Strong Buy) ranking, or the top 15% and top 5% of stocks, respectively, should outperform the market. Strong Buy stocks should outperform more than any other rank.

Should You Consider CleanSpark?

The last thing we will do today, now that we have a grasp on the ESP and how powerful of a tool it can be, is to quickly look at a qualifying stock. CleanSpark (CLSK) holds a #2 (Buy) at the moment and its Most Accurate Estimate comes in at $0.09 a share 14 days away from its upcoming earnings release on May 9, 2024.

CleanSpark's Earnings ESP sits at +63.64%, which, as explained above, is calculated by taking the percentage difference between the $0.09 Most Accurate Estimate and the Zacks Consensus Estimate of $0.06. CLSK is also part of a large group of stocks that boast a positive ESP. Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they've reported.

CLSK is just one of a large group of Finance stocks with a positive ESP figure. Chubb (CB) is another qualifying stock you may want to consider.

Slated to report earnings on July 23, 2024, Chubb holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is $5.46 a share 89 days from its next quarterly update.

For Chubb, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $5.46 is +0.15%.

CLSK and CB's positive ESP figures tell us that both stocks have a good chance at beating analyst expectations in their next earnings report.

Find Stocks to Buy or Sell Before They're Reported

Use the Zacks Earnings ESP Filter to turn up stocks with the highest probability of positively, or negatively, surprising to buy or sell before they're reported for profitable earnings season trading. Check it out here >>

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Cleanspark, Inc. (CLSK) : Free Stock Analysis Report

Chubb Limited (CB) : Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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