Maximize Your Investment Returns with Effective Earnings Predictions

Quarterly financial reports are crucial for investors on Wall Street, providing insights into a company’s performance and future expectations. Among the various metrics available, earnings are some of the most significant.

In both life and the stock market, expectations matter. When companies surpass these expectations, they are often rewarded with higher stock prices. Conversely, failing to meet them may lead to negative outcomes. By identifying stocks with positive earnings surprises, investors can potentially enhance their returns.

Understanding the Zacks Earnings ESP

The Zacks Earnings ESP (Expected Surprise Prediction) filter helps identify earnings surprises by focusing on recent analyst revisions. The underlying idea is simple: if analysts adjust their earnings estimates prior to a release, they likely possess new information that could enhance accuracy.

This model compares the Most Accurate Estimate against the Zacks Consensus Estimate, with the resulting percentage difference forming the Earnings ESP. Additionally, the Zacks Rank is incorporated to identify companies likely to exceed their bottom-line consensus estimates, aiming to boost their stock prices.

When combining a Zacks Rank of #3 (Hold) or better with a positive Earnings ESP, stocks have historically produced positive surprises 70% of the time. Notably, these parameters yielded average annual returns of 28.3%, according to a 10-year backtest.

A #3 ranked stock is expected to perform in line with the broader market. Meanwhile, stocks ranked #2 (Buy) and #1 (Strong Buy), which fall into the top 15% and top 5% of all stocks, respectively, are projected to outperform the market, with Strong Buy stocks likely leading the pack.

Could Meta Platforms Be a Good Investment?

Now that we have a grasp on the ESP, let’s examine a stock that fits the criteria: Meta Platforms (META). Currently rated #3 (Hold), its Most Accurate Estimate stands at $7.01 per share, with the next earnings report due on January 29, 2025.

Meta Platforms has a positive Earnings ESP of +3.73%, derived from comparing its $7.01 estimate with the Zacks Consensus Estimate of $6.75. This places META among a collective of stocks with positive ESPs. Be sure to utilize the Earnings ESP Filter to discover the best stock opportunities ahead of reporting.

In the same category, Broadcom Inc. (AVGO) looks promising as well. Set to report earnings on March 6, 2025, it holds a #2 (Buy) ranking, with a Most Accurate Estimate of $1.51 per share, just 49 days away from its quarterly update.

Broadcom Inc.’s Earnings ESP currently shows +0.17%, calculated by the difference between its Most Accurate Estimate and the Zacks Consensus Estimate of $1.50.

Both META and AVGO’s positive Earnings ESP figures suggest they have a good chance of exceeding analysts’ expectations in their upcoming earnings reports.

Investigate Stocks to Buy or Sell Before Earnings Reports

Use the Zacks Earnings ESP Filter to uncover stocks poised for positive or negative earnings surprises before their announcements, enhancing your earnings season trading strategy. Check it out here >>

Zacks’ Top Semiconductor Stock Revealed

This stock is only 1/9,000th the size of NVIDIA, which has surged over +800% since our recommendation. While NVIDIA remains a strong player, our new top chip stock has significant potential for growth.

With robust earnings growth and an increasing customer base, it’s well-positioned to meet the soaring demand for Artificial Intelligence, Machine Learning, and the Internet of Things. The global semiconductor manufacturing market is forecasted to soar from $452 billion in 2021 to $803 billion by 2028.

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Meta Platforms, Inc. (META): Free Stock Analysis Report

Broadcom Inc. (AVGO): Free Stock Analysis Report

For more information on this article, visit Zacks.com.

The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.