Why Investors Need to Take Advantage of These 2 Basic Materials Stocks Now
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.
The ability to identify stocks that are likely to top quarterly earnings expectations can be profitable, but it's no simple task. Here at Zacks, our Earnings ESP filter helps make things easier.
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.
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 Zacks Rank is also factored into the ESP metric to better help find companies that appear poised to top their next bottom-line consensus estimate, which will hopefully help lift the stock price.
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.
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 Barrick Gold?
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. Barrick Gold (GOLD) holds a #2 (Buy) at the moment and its Most Accurate Estimate comes in at $0.27 a share four days away from its upcoming earnings release on August 12, 2024.
By taking the percentage difference between the $0.27 Most Accurate Estimate and the $0.26 Zacks Consensus Estimate, Barrick Gold has an Earnings ESP of +3.29%. Investors should also know that GOLD is one of a large group 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.
GOLD is just one of a large group of Basic Materials stocks with a positive ESP figure. HudBay Minerals (HBM) is another qualifying stock you may want to consider.
Slated to report earnings on August 13, 2024, HudBay Minerals holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is $0.06 a share five days from its next quarterly update.
The Zacks Consensus Estimate for HudBay Minerals is $0.06, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +1.12%.
Because both stocks hold a positive Earnings ESP, GOLD and HBM 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 >>
7 Best Stocks for the Next 30 Days
Just released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."
Since 1988, the full list has beaten the market more than 2X over with an average gain of +24.2% per year. So be sure to give these hand picked 7 your immediate attention.
See them now >>Barrick Gold Corporation (GOLD) : Free Stock Analysis Report
HudBay Minerals Inc (HBM) : Free Stock Analysis Report
