How to Find Strong Medical Stocks That Are Expected to Deliver Positive Earnings Surprises

Two factors often determine stock prices over the long term: earnings and interest rates. Investors can’t control the latter, but they can focus on a company’s earnings performance each quarter.

The earnings themselves are key, but beating or missing the bottom line can sometimes be just as, if not more, important. That’s why investors should consider paying close attention to these earnings surprises, as a big beat could help the stock climb even higher.

2 stocks worth adding to your watchlist

The Zacks Earnings ESP is more formally known as the Expected Surprise Prediction and is intended to catch the inside track of the latest analyst estimate revisions ahead of a company’s report. The idea is relatively intuitive, as a newer forecast can 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.

The final step today will be to look at stocks that meet our ESP requirements. Natera (NTRA) receives a Zacks Rank #3 10 days ahead of its next quarterly report on August 1, 2024, with a Most Accurate Estimate of -$0.59 per share.

NTRA estimates an Earnings ESP of 14.9%, which, as explained above, is calculated by taking the percentage difference between the Most Accurate Estimate of -$0.59 and the Zacks Consensus Estimate of -$0.69.

NTRA is just one of a large group of healthcare stocks that have posted a positive ESP. Merck (MRK) is another qualifying stock you may want to consider.

Merck, which is preparing to report earnings on July 30, 2024, is currently sitting at a Zacks Rank #3 (Hold). Its Most Accurate Estimate is currently $2.16 per share, with MRK having eight days until its next earnings report.

The Zacks Consensus Estimate for Merck is $2.15. When we take the percentage difference between this number and the Most Accurate Estimate, we get an Earnings ESP of 0.25%.

Since both companies have a positive Earnings ESP, NTRA and MRK could potentially post higher-than-expected earnings in their next reports.

Find stocks to buy or sell before they’re reported

Use the Zacks Earnings ESP filter to view stocks with the highest probability of producing a positive or negative buying or selling surprise before they report for profitable trading during earnings season. Check here >>

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Natera, Inc. (NTRA): Free Stock Analysis Report

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