Want Better Returns? Don’t Ignore These 2 Finance Stocks Set to Beat Earnings

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.

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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.

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 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.

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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. Morgan Stanley (MS) earns a Zacks Rank #3 right now and its Most Accurate Estimate sits at $1.59 a share, just 27 days from its upcoming earnings release on January 16, 2025.

Morgan Stanley’s Earnings ESP sits at 0.62%, which, as explained above, is calculated by taking the percentage difference between the $1.59 Most Accurate Estimate and the Zacks Consensus Estimate of $1.58.

MS is part of a big group of Finance stocks that boast a positive ESP, and investors may want to take a look at Capital Southwest (CSWC) as well.

Capital Southwest is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on February 3, 2025. CSWC’s Most Accurate Estimate sits at $0.62 a share 45 days from its next earnings release.

The Zacks Consensus Estimate for Capital Southwest is $0.61, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of 1.64%.

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MS and CSWC’s positive ESP metrics may signal that a positive earnings surprise for both stocks is on the horizon.

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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