How to Boost Your Portfolio with Top Transportation Stocks Set to Beat Earnings

Zacks Investment Research highlights its Earnings ESP (Expected Surprise Prediction) tool as a method to identify stocks likely to beat quarterly earnings estimates, calculated by comparing the most accurate analyst estimate to the consensus. Historically, stocks with a positive ESP and a Zacks Rank of #3 or stronger have demonstrated a 70% probability of positive bottom-line surprises and generated an average annual return of 28% over a 10-year backtest. The article specifically points to C.H. Robinson Worldwide (CHRW), with a +5.29% ESP, and Westinghouse Air Brake Technologies (WAB), with a +0.64% ESP, both holding a #2 (Buy) Zacks Rank, as current examples poised for potential earnings beats.

Analysis

The analysis highlights the Zacks Earnings Expected Surprise Prediction (ESP) as a quantitative tool for identifying stocks likely to outperform their earnings estimates. The methodology's core thesis is that the most recent analyst revisions, captured in the 'Most Accurate Estimate', provide a superior signal to the broader consensus. The article substantiates this claim with a 10-year backtest showing that stocks with a positive ESP and a Zacks Rank of #3 (Hold) or higher delivered positive earnings surprises 70% of the time, yielding an average annual return of approximately 28%. Two specific transportation stocks are identified as currently meeting these criteria. C.H. Robinson Worldwide (CHRW), with a Zacks Rank of #2 (Buy), exhibits a strong positive ESP of +5.29% based on a Most Accurate Estimate of $0.97 versus a consensus of $0.92 ahead of its July 31, 2024 earnings report. Similarly, Westinghouse Air Brake Technologies (WAB) holds a #2 (Buy) rank and a positive, though more modest, ESP of +0.64% ($1.84 vs. $1.83) for its report due on October 23, 2024. The data positions CHRW as a particularly immediate candidate for a potential earnings beat, given its stronger ESP and imminent reporting date.

Key Decisions for Investors

• Investors may consider C.H. Robinson Worldwide (CHRW) for a short-term trade, as its +5.29% ESP and #2 (Buy) rank indicate a high probability of a positive earnings surprise according to the backtested model.
• For Westinghouse Air Brake Technologies (WAB), the positive but marginal ESP of +0.64% suggests it should be added to a watchlist; investors should monitor analyst estimate revisions as its later reporting date of October 23 approaches.
• Investors should recognize that while the presented 70% historical success rate is compelling, it is not a guarantee, and an earnings beat does not always translate to a positive stock price movement, warranting prudent risk management.
• Consider incorporating the spread between the 'Most Accurate Estimate' and the 'Consensus Estimate' as a factor in pre-earnings analysis for other holdings to identify potential volatility and surprise candidates.