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.
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.
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. Arbor Realty Trust (ABR) earns a Zacks Rank #1 right now and its Most Accurate Estimate sits at $0.43 a share, just four days from its upcoming earnings release on February 21, 2025.
By taking the percentage difference between the $0.43 Most Accurate Estimate and the $0.42 Zacks Consensus Estimate, Arbor Realty Trust has an Earnings ESP of 2.99%.
ABR is just one of a large group of Finance stocks with a positive ESP figure. CME Group (CME) is another qualifying stock you may want to consider.
Slated to report earnings on April 23, 2025, CME Group holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is $2.61 a share 65 days from its next quarterly update.
The Zacks Consensus Estimate for CME Group is $2.59, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of 0.77%.
ABR and CME's positive ESP metrics may signal that a positive earnings surprise for both stocks is on the horizon.
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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