Quarterly financial reports play a vital role on Wall Street, as they help investors see how a company has performed and what might be coming down the road in the near-term. And out of all of the metrics and results to consider, earnings is one of the most important.
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.
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.
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 ranking of #3 (Hold), or 60% of all stocks covered by the Zacks Rank, are expected to perform in-line with the broader market. Stocks with rankings of #2 (Buy) and #1 (Strong Buy), 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 Global Ship Lease?
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 quickly look at a qualifying stock. Global Ship Lease (GSL) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at $2.34 a share 11 days away from its upcoming earnings release on March 3, 2025.
Global Ship Lease's Earnings ESP sits at +1.96%, which, as explained above, is calculated by taking the percentage difference between the $2.34 Most Accurate Estimate and the Zacks Consensus Estimate of $2.30. GSL 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.
GSL is one of just a large database of Transportation stocks with positive ESPs. Another solid-looking stock is C.H. Robinson Worldwide (CHRW).
Slated to report earnings on May 7, 2025, C.H. Robinson Worldwide holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is $1.10 a share 76 days from its next quarterly update.
C.H. Robinson Worldwide's Earnings ESP figure currently stands at +3.44% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $1.06.
Because both stocks hold a positive Earnings ESP, GSL and CHRW 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 >>
Should You Invest in Global Ship Lease, Inc. (GSL)?
Before you invest in Global Ship Lease, Inc. (GSL), want to know the best stocks to buy for the next 30 days? Check out Zacks Investment Research for our free report on the 7 best stocks to buy.
Zacks Investment Research has been committed to providing investors with tools and independent research since 1978. For more than a quarter century, the Zacks Rank stock-rating system has more than doubled the S&P 500 with an average gain of +24.08% per year. (These returns cover a period from January 1, 1988 through May 6, 2024.)
Global Ship Lease, Inc. (GSL) : Free Stock Analysis Report
C.H. Robinson Worldwide, Inc. (CHRW) : Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
