Want Better Returns? Don?t Ignore These 2 Construction Stocks Set to Beat Earnings

Earnings are arguably the most important single number on a company's quarterly financial report. Wall Street clearly dives into all of the other metrics and management's input, but the EPS figure helps cut through all the noise.

We know earnings results are vital, but how a company performs compared to bottom line expectations can be even more important when it comes to stock prices, especially in the near-term. This means that investors might want to take advantage of these earnings surprises.

Now that we know how important earnings and earnings surprises are, it's time to show investors how to take advantage of these events to boost their returns by utilizing the Zacks Earnings ESP filter.

The Zacks Earnings ESP, Explained

The Zacks Expected Surprise Prediction, or ESP, works by locking in on the most up-to-date analyst earnings revisions because they can be more accurate than estimates from weeks or even months before the actual release date. The thinking is pretty straightforward: analysts who provide earnings estimates closer to the report are likely to have more information.

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.

When we join a positive earnings ESP with a Zacks Rank #3 (Hold) or stronger, stocks posted a positive bottom-line surprise 70% of the time. Plus, this system saw investors produce roughly 28% annual returns on average, according to our 10 year backtest.

Stocks with a #3 (Hold) ranking, which is most stocks covered at 60%, are expected to perform in-line with the broader market. But stocks that fall into the #2 (Buy) and #1 (Strong Buy) ranking, or the top 15% and top 5% of stocks, respectively, should outperform the market. Strong Buy stocks should outperform more than any other rank.

Should You Consider PulteGroup?

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. PulteGroup (PHM) earns a #3 (Hold) right now and its Most Accurate Estimate sits at $2.48 a share, just five days from its upcoming earnings release on April 22, 2025.

PHM has an Earnings ESP figure of +0.27%, which, as explained above, is calculated by taking the percentage difference between the $2.48 Most Accurate Estimate and the Zacks Consensus Estimate of $2.47. PulteGroup 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.

PHM is just one of a large group of Construction stocks with a positive ESP figure. Trane Technologies (TT) is another qualifying stock you may want to consider.

Slated to report earnings on April 30, 2025, Trane Technologies holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is $2.22 a share 13 days from its next quarterly update.

For Trane Technologies, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $2.19 is +1.25%.

PHM and TT'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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This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research