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.
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 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. Archrock Inc. (AROC) holds a Zacks Rank #1 at the moment and its Most Accurate Estimate comes in at $0.41 a share 29 days away from its upcoming earnings release on April 29, 2025.
AROC has an Earnings ESP figure of 3.85%, which, as explained above, is calculated by taking the percentage difference between the $0.41 Most Accurate Estimate and the Zacks Consensus Estimate of $0.39.
AROC is one of just a large database of Oils-Energy stocks with positive ESPs. Another solid-looking stock is Baker Hughes (BKR).
Slated to report earnings on April 22, 2025, Baker Hughes holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is $0.49 a share 22 days from its next quarterly update.
Baker Hughes' Earnings ESP figure currently stands at 1.87% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $0.48.
AROC and BKR'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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Archrock, Inc. (AROC) : Free Stock Analysis Report
Baker Hughes Company (BKR) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
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