Looking for Stocks with Positive Earnings Momentum? Check Out These 2 Construction Names

Zacks Investment Research highlights its proprietary Earnings ESP (Expected Surprise Prediction) tool as a method to identify stocks likely to exceed quarterly earnings expectations. This system, which compares a 'Most Accurate Estimate' to the 'Zacks Consensus Estimate,' has demonstrated a 70% success rate in predicting positive earnings surprises when combined with a Zacks Rank #3 (Hold) or better, yielding an average annual return of 28.3% over a decade. Currently, construction sector stocks United Rentals (URI) and Trane Technologies (TT) exhibit positive ESPs of +5.33% and +0.54% respectively, suggesting a strong probability of beating their upcoming earnings estimates. This methodology offers investors a systematic approach to capitalize on earnings season volatility.

Analysis

The Zacks Earnings Expected Surprise Prediction (ESP) model identifies two construction sector stocks, United Rentals (URI) and Trane Technologies (TT), as having a high probability of delivering a positive earnings surprise. The model, which has a reported 70% historical success rate in predicting beats when combined with a Zacks Rank of #3 (Hold) or better, leverages the most recent analyst revisions to forecast outcomes. United Rentals exhibits particularly strong signals, holding a #2 (Buy) rank and a significant positive ESP of +5.33%, derived from its Most Accurate Estimate of $11.10 per share surpassing the consensus of $10.54 ahead of its July 23 report. Trane Technologies also presents a positive outlook, though more subdued, with a #3 (Hold) rank and a +0.54% ESP, as its Most Accurate Estimate of $3.79 slightly exceeds the $3.76 consensus. These quantitative indicators suggest upward earnings momentum for both companies, with a notably stronger signal for URI.

Key Decisions for Investors

• Investors with a bullish view on United Rentals may find the combination of a #2 (Buy) rank and a +5.33% ESP to be a strong confirming signal ahead of its upcoming earnings, suggesting a high probability of a positive catalyst.
• For Trane Technologies, the positive but smaller +0.54% ESP and #3 (Hold) rank suggest a more modest potential for an earnings beat, warranting a cautiously optimistic stance pending the actual report.
• Traders utilizing pre-earnings strategies should note that while the model has a strong backtest, it is a probabilistic indicator, and positions should account for the inherent volatility associated with earnings announcements.