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 is more formally known as the Expected Surprise Prediction, and it aims to grab the inside track on the latest analyst estimate revisions ahead of a company’s report. The idea is relatively intuitive as a newer projection might be based on more complete information. The ESP is calculated by comparing the Most Accurate Estimate to the Zacks Consensus Estimate, with the percentage difference between the two giving us the Zacks ESP figure.
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. Automatic Data Processing (ADP) earns a Zacks Rank #3 right now and its Most Accurate Estimate sits at $2.21 a share, just 30 days from its upcoming earnings release on October 23, 2024.
Automatic Data Processing’s Earnings ESP sits at 0.37%, which, as explained above, is calculated by taking the percentage difference between the $2.21 Most Accurate Estimate and the Zacks Consensus Estimate of $2.20.
ADP is just one of a large group of Business Services stocks with a positive ESP figure. DocuSign (DOCU) is another qualifying stock you may want to consider.
DocuSign, which is readying to report earnings on December 5, 2024, sits at a Zacks Rank #1 (Strong Buy) right now. It’s Most Accurate Estimate is currently $0.87 a share, and DOCU is 73 days out from its next earnings report.
The Zacks Consensus Estimate for DocuSign is $0.85, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of 1.86%.
Because both stocks hold a positive Earnings ESP, ADP and DOCU could potentially post earnings beats in their next reports.
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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Automatic Data Processing, Inc. (ADP) : Free Stock Analysis Report
Docusign Inc. (DOCU) : Free Stock Analysis Report
