Want Better Returns? Don’t Ignore These 2 Medical Stocks Set to Beat Earnings

In the world of investing, quarterly earnings reports serve as critical benchmarks that provide insights into a company’s performance and future potential. Among the figures presented, earnings often take center stage, as they represent the core profitability drivers behind stock prices. When companies beat earnings expectations, they typically see a rise in their valuation. Conversely, failing to meet or exceed expectations can have negative repercussions for stock prices. Investors keen to optimize their portfolios might want to look for stocks that are poised to report positive earnings surprises.

The Value of Earnings Surprises

Finding companies that may exceed earnings estimates is an investment strategy often referred to as hunting for “earnings whispers.” However, pinpointing these opportunities isn’t an easy task. One effective approach to uncover potential earnings surprises is by leveraging the Earnings ESP (Expected Surprise Prediction) model. This innovative tool focuses on the most recent analyst earnings revisions, which tend to be more accurate than earlier estimates.

The ESP model compares the Most Accurate Estimate to the Zacks Consensus Estimate, calculating the percentage difference to generate the Expected Surprise Prediction. Additionally, the Zacks Rank is incorporated into this metric to help identify companies that are likely to outperform their next earnings consensus estimates. Research indicates that when analysts combine a Zacks Rank of #3 (Hold) or higher with a positive Earnings ESP, there’s a 70% probability of a positive surprise. Moreover, this strategy has yielded impressive annual returns averaging around 28.3% over the last decade.

Recognizing Potential Earnings Stars

So, which companies should you consider? Let’s take a closer look at two medical stocks that are showing signs of potential earnings surprises. The first is Pfizer (PFE), currently sitting at a Zacks Rank of #3 (Hold). As of its upcoming earnings release scheduled for October 29, 2024, Pfizer boasts a Most Accurate Estimate of $0.65 per share and an Earnings ESP of +2.68%. This figure is derived from the percentage difference between the Most Accurate Estimate and a Consensus Estimate of $0.64.

Pfizer has been in the news not only for its key role in the COVID-19 vaccine distribution but also for its broader pipeline of products in various therapeutic areas. Given its strong position and expected positive earnings signal, it may be a stock worth keeping on your radar.

Another Contender: DexCom

The second stock to consider is DexCom (DXCM), which, like Pfizer, holds a Zacks Rank of #3 (Hold). DexCom is set to report earnings on February 13, 2025. As of now, its Most Accurate Estimate stands at $0.52 per share, while its Consensus Estimate is $0.51, leading to an Earnings ESP of +0.98%. DexCom has solidified itself as a leader in continuous glucose monitoring systems, making it an attractive option for investors interested in the medical technology sector.

Conclusion: The Importance of Earnings Predictions

Investors looking for promising returns may benefit from focusing on companies like Pfizer and DexCom, both of which showcase positive Earnings ESP metrics. By utilizing the Earnings ESP tool, investors can uncover stocks with strong potential to exceed earnings expectations, thereby enhancing their chances of capturing superior returns.

As the stock market continues to evolve, keeping a keen eye on earnings surprises can be a strategic move for investors. Remember, it’s not just about the numbers — it’s about understanding the story behind those numbers and leveraging insights effectively to make informed investment decisions.