Earnings are arguably the most important single number on a company's quarterly financial report. Wall Street clearly dives into all of the other metrics and management's input, but the EPS figure helps cut through all the noise.

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.

2 Stocks to Add to Your Watchlist

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.

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. Amgen (AMGN) holds a Zacks Rank #3 at the moment and its Most Accurate Estimate comes in at $4.95 a share six days away from its upcoming earnings release on August 6, 2024.

Amgen's Earnings ESP sits at 0.48%, which, as explained above, is calculated by taking the percentage difference between the $4.95 Most Accurate Estimate and the Zacks Consensus Estimate of $4.92.

AMGN is part of a big group of Medical stocks that boast a positive ESP, and investors may want to take a look at ResMed (RMD) as well.

ResMed, which is readying to report earnings on August 1, 2024, sits at a Zacks Rank #3 (Hold) right now. It's Most Accurate Estimate is currently $2.09 a share, and RMD is one day out from its next earnings report.

For ResMed, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $2.03 is 2.85%.

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

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 >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report



Amgen Inc. (AMGN):Free Stock Analysis Report

ResMed Inc. (RMD):Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research