These 2 Oils and Energy Stocks Could Beat Earnings: Why They Should Be on Your Radar

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.

Now that we know how important earnings and earnings surprises are, it's time to show investors how to take advantage of these events to boost their returns by utilizing the Zacks Earnings ESP filter.

The Zacks Earnings ESP, Explained

The Zacks Expected Surprise Prediction, or ESP, works by locking in on the most up-to-date analyst earnings revisions because they can be more accurate than estimates from weeks or even months before the actual release date. The thinking is pretty straightforward: analysts who provide earnings estimates closer to the report are likely to have more 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.

Bringing together a positive earnings ESP alongside a Zacks Rank #3 (Hold) or better has helped stocks report a positive earnings surprise 70% of the time. Furthermore, by using these parameters, investors have seen 28.3% 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 Enterprise Products Partners?

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. Enterprise Products Partners EPD holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at $0.69 a share 27 days away from its upcoming earnings release on August 6, 2024.

By taking the percentage difference between the $0.69 Most Accurate Estimate and the $0.66 Zacks Consensus Estimate, Enterprise Products Partners has an Earnings ESP of +5.34%. Investors should also know that EPD 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.

EPD is part of a big group of Oils and Energy stocks that boast a positive ESP, and investors may want to take a look at TC Energy TRP as well.

Slated to report earnings on July 25, 2024, TC Energy holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is $0.65 a share 15 days from its next quarterly update.

The Zacks Consensus Estimate for TC Energy is $0.63, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +3.18%.

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

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