February 18, 2025

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Why They Should Be on Your Radar

Why They Should Be on Your Radar

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.

The earnings figure itself is key, but a beat or miss on the bottom line can sometimes be just as, if not more, important. Therefore, investors should consider paying close attention to these earnings surprises, as a big beat can help a stock climb even higher.

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 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 look at a qualifying stock. Pinterest (PINS) holds a Zacks Rank #3 at the moment and its Most Accurate Estimate comes in at $0.35 a share 16 days away from its upcoming earnings release on November 7, 2024.

Pinterest’s Earnings ESP sits at 1.69%, which, as explained above, is calculated by taking the percentage difference between the $0.35 Most Accurate Estimate and the Zacks Consensus Estimate of $0.34.

PINS is one of just a large database of Computer and Technology stocks with positive ESPs. Another solid-looking stock is Okta (OKTA).

Okta, which is readying to report earnings on December 4, 2024, sits at a Zacks Rank #1 (Strong Buy) right now. It’s Most Accurate Estimate is currently $0.58 a share, and OKTA is 43 days out from its next earnings report.

For Okta, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $0.57 is 1.21%.

PINS and OKTA’s positive ESP figures tell us that both stocks have a good chance at beating analyst expectations in their next earnings report.

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 >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

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