How to Find Strong Aerospace Stocks Slated for Positive Earnings Surprises

Two factors often determine stock prices in the long run: earnings and interest rates. Investors can't control the latter, but they can focus on a company's earnings results every quarter.

We know earnings results are vital, but how a company performs compared to bottom line expectations can be even more important when it comes to stock prices, especially in the near-term. This means that investors might want to take advantage of these earnings surprises.

Hunting for 'earnings whispers' or companies poised to beat their quarterly earnings estimates is a somewhat common practice. But that doesn't make it easy. One way that has been proven to work is by using the Zacks Earnings ESP tool.

The Zacks Earnings ESP, Explained

The Zacks Expected Surprise Prediction, or ESP, works by locking in on the most up-to-date analyst earnings revisions because they can be more accurate than estimates from weeks or even months before the actual release date. The thinking is pretty straightforward: analysts who provide earnings estimates closer to the report are likely to have more information.

With this in mind, the Expected Surprise Prediction compares the Most Accurate Estimate (being the most recent) against the overall Zacks Consensus Estimate. The percentage difference provides the ESP figure. The system also utilizes our core Zacks Rank to provide a stronger system for identifying stocks that might beat their next quarterly earnings estimate and possibly see the stock price climb.

When we join a positive earnings ESP with a Zacks Rank #3 (Hold) or stronger, stocks posted a positive bottom-line surprise 70% of the time. Plus, this system saw investors produce roughly 28% annual returns on average, according to our 10 year backtest.

Most stocks, about 60%, fall into the #3 (Hold) category, and they are expected to perform in-line with the broader market. Stocks with a #2 (Buy) and #1 (Strong Buy) rating, or the top 15% and top 5% of stocks, respectively, should outperform the market, with Strong Buy stocks outperforming more than any other rank.

Should You Consider Huntington Ingalls?

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. Huntington Ingalls (HII) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at $3.51 a share two days away from its upcoming earnings release on May 2, 2024.

Huntington Ingalls' Earnings ESP sits at +0.87%, which, as explained above, is calculated by taking the percentage difference between the $3.51 Most Accurate Estimate and the Zacks Consensus Estimate of $3.48. HII 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.

HII is just one of a large group of Aerospace stocks with a positive ESP figure. Northrop Grumman (NOC) is another qualifying stock you may want to consider.

Northrop Grumman, which is readying to report earnings on July 25, 2024, sits at a Zacks Rank #3 (Hold) right now. It's Most Accurate Estimate is currently $6.04 a share, and NOC is 86 days out from its next earnings report.

The Zacks Consensus Estimate for Northrop Grumman is $6.03, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +0.07%.

HII and NOC's positive ESP metrics may signal that a positive earnings surprise for both stocks is on the horizon.

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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Huntington Ingalls Industries, Inc. (HII) : Free Stock Analysis Report

Northrop Grumman Corporation (NOC) : Free Stock Analysis Report

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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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