Earnings are arguably the most important single number on a company’s quarterly financial report. Wall Street clearly dives into all of the other metrics and management’s input, but the EPS figure helps cut through all the noise.
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.
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. Alaska Air Group (ALK) earns a Zacks Rank #3 15 days from its next quarterly earnings release on October 20, 2022, and its Most Accurate Estimate comes in at $2.65 a share.
ALK has an Earnings ESP figure of 11.58%, which, as explained above, is calculated by taking the percentage difference between the $2.65 Most Accurate Estimate and the Zacks Consensus Estimate of $2.38.
ALK is part of a big group of Transportation stocks that boast a positive ESP, and investors may want to take a look at JetBlue Airways (JBLU) as well.
Slated to report earnings on October 25, 2022, JetBlue Airways holds a #3 (Hold) ranking on the Zacks Rank, and it’s Most Accurate Estimate is $0.21 a share 20 days from its next quarterly update.
JetBlue Airways’ Earnings ESP figure currently stands at 4.92% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $0.20.
ALK and JBLU’s positive ESP figures tell us that both stocks have a good chance at beating analyst expectations in their next earnings report.