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.
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.
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. Nvidia (NVDA) earns a Zacks Rank #3 16 days from its next quarterly earnings release on May 25, 2022, and its Most Accurate Estimate comes in at $1.33 a share.
Nvidia’s Earnings ESP sits at 2.57%, which, as explained above, is calculated by taking the percentage difference between the $1.33 Most Accurate Estimate and the Zacks Consensus Estimate of $1.30.
NVDA is one of just a large database of Computer and Technology stocks with positive ESPs. Another solid-looking stock is Silicon Motion (SIMO).
Silicon Motion is a Zacks Rank #2 (Buy) stock, and is getting ready to report earnings on August 4, 2022. SIMO’s Most Accurate Estimate sits at $1.69 a share 87 days from its next earnings release.
The Zacks Consensus Estimate for Silicon Motion is $1.67, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of 0.96%.
NVDA and SIMO’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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NVIDIA Corporation (NVDA) : Free Stock Analysis Report
Silicon Motion Technology Corporation (SIMO) : Free Stock Analysis Report
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