How to Find Strong Basic Materials Stocks Slated for Positive Earnings Surprises

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.

The earnings figure itself is key, of course, 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 and vice versa.

Hunting for 'earnings whispers' or companies poised to beat their quarterly earnings estimates is a somewhat common practice. But that doesn't make it easy. One way that has been proven to work is by using the Zacks Earnings ESP tool.

The Zacks Earnings ESP, Explained

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.

Now that we understand the basic idea, let's look at how the Expected Surprise Prediction works. 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.

Bringing together a positive earnings ESP alongside a Zacks Rank #3 (Hold) or better has helped stocks report a positive earnings surprise 70% of the time. Furthermore, by using these parameters, investors have seen 28.3% annual returns on average, according to our 10 year backtest.

Most stocks, about 60%, fall into the #3 (Hold) category, and they are expected to perform in-line with the broader market. Stocks with a #2 (Buy) and #1 (Strong Buy) rating, or the top 15% and top 5% of stocks, respectively, should outperform the market, with Strong Buy stocks outperforming more than any other rank.

Should You Consider Alamos Gold?

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. Alamos Gold (AGI) earns a #3 (Hold) right now and its Most Accurate Estimate sits at $0.22 a share, just 20 days from its upcoming earnings release on April 30, 2025.

Alamos Gold's Earnings ESP sits at +0.78%, which, as explained above, is calculated by taking the percentage difference between the $0.22 Most Accurate Estimate and the Zacks Consensus Estimate of $0.21. AGI is also part of a large group of stocks that boast a positive ESP. Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they've reported.

AGI is part of a big group of Basic Materials stocks that boast a positive ESP, and investors may want to take a look at Reliance (RS) as well.

Reliance is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on April 23, 2025. RS' Most Accurate Estimate sits at $3.70 a share 13 days from its next earnings release.

For Reliance, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $3.66 is +1.09%.

AGI and RS' 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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This article originally published on Zacks Investment Research (zacks.com).

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