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 Earnings ESP is more formally known as the Expected Surprise Prediction, and it aims to grab the inside track on the latest analyst estimate revisions ahead of a company's report. The idea is relatively intuitive as a newer projection might be based on more complete information.
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.
Bringing together a positive earnings ESP alongside a Zacks Rank #3 (Hold) or better has helped stocks report a positive earnings surprise 70% of the time. Furthermore, by using these parameters, investors have seen 28.3% annual returns on average, according to our 10 year backtest.
Stocks with a ranking of #3 (Hold), or 60% of all stocks covered by the Zacks Rank, are expected to perform in-line with the broader market. Stocks with rankings of #2 (Buy) and #1 (Strong Buy), 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 Agnico Eagle Mines?
Now that we understand what the ESP is and how beneficial it can be, let's dive into a stock that currently fits the bill. Agnico Eagle Mines (AEM) earns a #3 (Hold) right now and its Most Accurate Estimate sits at $0.85 a share, just 27 days from its upcoming earnings release on July 24, 2024.
Agnico Eagle Mines' Earnings ESP sits at +5.68%, which, as explained above, is calculated by taking the percentage difference between the $0.85 Most Accurate Estimate and the Zacks Consensus Estimate of $0.81. AEM 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.
AEM is just one of a large group of Basic Materials stocks with a positive ESP figure. Barrick Gold (GOLD) is another qualifying stock you may want to consider.
Slated to report earnings on August 13, 2024, Barrick Gold holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is $0.30 a share 47 days from its next quarterly update.
For Barrick Gold, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $0.27 is +11.11%.
AEM and GOLD'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 >>
Free Report: 5 “Whisper” Stocks Poised to Stun Wall Street
Analysts may be seriously underestimating these stocks. When they announce earnings, they could immediately jump +10-20%.
See Stocks Now >>Agnico Eagle Mines Limited (AEM) : Free Stock Analysis Report
Barrick Gold Corporation (GOLD) : 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.
