These 2 Finance Stocks Could Beat Earnings: Why They Should Be on Your Radar

The article highlights the Zacks Earnings ESP (Expected Surprise Prediction) as a proprietary tool designed to forecast earnings surprises by comparing the 'Most Accurate Estimate' to the Zacks Consensus Estimate. Historically, combining a positive ESP with a Zacks Rank #3 or better has resulted in a 70% positive surprise rate and generated an average of 28.3% annual returns over a 10-year backtest. This methodology identifies potential positive earnings surprises for stocks such as BlackRock (BLK), with a +7.25% ESP, and Travelers (TRV), with a +20.17% ESP, suggesting a valuable metric for investors seeking to capitalize on earnings season trading opportunities.

Analysis

The analysis centers on the Zacks Earnings Expected Surprise Prediction (ESP), a proprietary quantitative model that suggests a heightened probability of an earnings beat for both BlackRock (BLK) and Travelers (TRV). According to the model's 10-year backtest, combining a positive ESP with a Zacks Rank of #3 (Hold) or better has historically yielded a positive surprise 70% of the time. For Travelers, the signal is particularly strong; with a Zacks Rank #2 (Buy) and a significant +20.17% ESP, the divergence between its Most Accurate EPS Estimate ($4.23) and the Consensus Estimate ($3.52) indicates a robust potential for an upside surprise in its upcoming July 17 report. BlackRock presents a more moderate signal, holding a Zacks Rank #3 (Hold) but still featuring a positive ESP of +7.25%, driven by its Most Accurate Estimate of $11.16 versus a consensus of $10.41. This suggests that while market expectations are for in-line performance, the most recent analyst revisions are trending positive ahead of its July 21 earnings release.

Key Decisions for Investors

• Given Travelers' (TRV) strong combination of a #2 (Buy) rank and a +20.17% Earnings ESP, investors may consider establishing or increasing a long position ahead of its July 17 earnings report to capitalize on the high probability of a positive surprise.
• For BlackRock (BLK), the positive +7.25% ESP contrasts with its neutral #3 (Hold) rating, suggesting a potential upside catalyst that the broader market may not fully appreciate; this could warrant a speculative long position or placing the stock on a watchlist for a post-earnings reaction.
• Investors interested in an earnings-focused strategy should consider utilizing the Zacks ESP filter as a screening tool to identify other equities with a statistically significant probability of beating consensus estimates.