Why They Should Be on Your Radar

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.

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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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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 look at a qualifying stock. Virtu Financial (VIRT) holds a Zacks Rank #2 at the moment and its Most Accurate Estimate comes in at $0.84 a share 13 days away from its upcoming earnings release on January 23, 2025.

Virtu Financial’s Earnings ESP sits at 1.83%, which, as explained above, is calculated by taking the percentage difference between the $0.84 Most Accurate Estimate and the Zacks Consensus Estimate of $0.82.

VIRT is part of a big group of Finance stocks that boast a positive ESP, and investors may want to take a look at Rithm (RITM) as well.

Slated to report earnings on February 5, 2025, Rithm holds a #2 (Buy) ranking on the Zacks Rank, and it’s Most Accurate Estimate is $0.46 a share 26 days from its next quarterly update.

The Zacks Consensus Estimate for Rithm is $0.45, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of 1.87%.

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VIRT and RITM’s positive ESP figures tell us that both stocks have a good chance at beating analyst expectations in their next earnings report.

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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