Wall Street watches a company’s quarterly report closely to understand as much as possible about its recent performance and what to expect going forward. Of course, one figure often stands out among the rest: earnings.
Life and the stock market are both about expectations, and rising above what is expected is often rewarded, while falling short can come with negative consequences. Investors might want to try to capture stronger returns by finding positive earnings surprises.
2 Stocks to Add to Your Watchlist
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 final step today is to look at a stock that meets our ESP qualifications. BorgWarner (BWA) earns a Zacks Rank #3 two days from its next quarterly earnings release on May 4, 2023, and its Most Accurate Estimate comes in at $1.20 a share.
By taking the percentage difference between the $1.20 Most Accurate Estimate and the $1.13 Zacks Consensus Estimate, BorgWarner has an Earnings ESP of 5.88%.
BWA is part of a big group of Auto-Tires-Trucks stocks that boast a positive ESP, and investors may want to take a look at CNH Industrial (CNHI) as well.
CNH Industrial, which is readying to report earnings on May 5, 2023, sits at a Zacks Rank #3 (Hold) right now. It’s Most Accurate Estimate is currently $0.32 a share, and CNHI is three days out from its next earnings report.
The Zacks Consensus Estimate for CNH Industrial is $0.32, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of 0.13%.
BWA and CNHI’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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BorgWarner Inc. (BWA) : Free Stock Analysis Report
CNH Industrial N.V. (CNHI) : Free Stock Analysis Report