Why Investors Need to Take Advantage of These 2 Transportation Stocks Now

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.

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, or Expected Surprise Prediction, aims to find earnings surprises by focusing on the most recent analyst revisions. The basic premise is that if an analyst reevaluates their earnings estimate ahead of an earnings release, it means they likely have new information that could possibly be more accurate.

Now that we understand the basic idea, let's look at how the Expected Surprise Prediction works. 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.

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 FedEx?

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. FedEx FDX holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at $5.40 a share 26 days away from its upcoming earnings release on June 25, 2024.

By taking the percentage difference between the $5.40 Most Accurate Estimate and the $5.31 Zacks Consensus Estimate, FedEx has an Earnings ESP of +1.65%. Investors should also know that FDX is one of a large group of stocks with positive ESPs.

FDX is one of just a large database of Transportation stocks with positive ESPs. Another solid-looking stock is Copa Holdings CPA.

Copa Holdings is a Zacks Rank #2 (Buy) stock, and is getting ready to report earnings on August 14, 2024. CPA's Most Accurate Estimate sits at $3.56 a share 76 days from its next earnings release.

For Copa Holdings, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $3.54 is +0.34%.

FDX and CPA's positive ESP metrics may signal that a positive earnings surprise for both stocks is on the horizon.

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