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, 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, 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.
With this in mind, the Expected Surprise Prediction compares the Most Accurate Estimate (being the most recent) against the overall Zacks Consensus Estimate. The percentage difference provides the ESP figure. The system also utilizes our core Zacks Rank to provide a stronger system for identifying stocks that might beat their next quarterly earnings estimate and possibly see the stock price climb.
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 Cheniere Energy?
The final step today is to look at a stock that meets our ESP qualifications. Cheniere Energy (LNG) earns a #3 (Hold) 23 days from its next quarterly earnings release on May 8, 2025, and its Most Accurate Estimate comes in at $2.91 a share.
LNG has an Earnings ESP figure of +0.23%, which, as explained above, is calculated by taking the percentage difference between the $2.91 Most Accurate Estimate and the Zacks Consensus Estimate of $2.90. Cheniere Energy is one of a large database of stocks with positive ESPs. Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they've reported.
LNG is just one of a large group of Oils and Energy stocks with a positive ESP figure. Coterra Energy (CTRA) is another qualifying stock you may want to consider.
Coterra Energy is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on May 5, 2025. CTRA's Most Accurate Estimate sits at $0.84 a share 20 days from its next earnings release.
Coterra Energy's Earnings ESP figure currently stands at +12.38% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $0.75.
Because both stocks hold a positive Earnings ESP, LNG and CTRA could potentially post earnings beats in their next reports.
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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Cheniere Energy, Inc. (LNG): Free Stock Analysis Report Coterra Energy Inc. (CTRA): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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