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

Earnings reports hold significant weight in the world of finance, and one number stands out above the rest: the earnings per share (EPS). This singular figure has the power to sway investors’ perceptions and trigger stock price movements. While Wall Street analysts scrutinize a variety of metrics, the EPS can slice through the financial jargon, giving investors a clearer picture of a company’s performance.

Understanding how companies meet or exceed earnings expectations is paramount for short-term investment strategies. This is where the concept of “earnings surprises” comes into play. Identifying stocks likely to outperform analysts’ expectations before quarterly earnings releases can prove beneficial for savvy investors. One effective approach to achieving this is through the use of the Earnings ESP (Expected Surprise Prediction) tool.

The Earnings ESP Explained

The Earnings ESP is a metric designed to provide insights into potential earnings surprises based on recent analyst estimate revisions. Simply put, it compares the most accurate earnings estimate—derived from the latest analyst insights—to the consensus estimate, which reflects the broader outlook. The difference between these two figures generates the ESP percentage, indicating the likelihood of a positive earnings surprise.

Combining this methodology with Zacks Rank provides a formidable framework for identifying stocks that are not only expected to beat their earnings estimates but also have a higher chance of seeing their prices increase post-announcement. Stocks that meet the standards of having a positive Earnings ESP alongside a Zacks Rank of #3 (Hold) or better have recorded a success rate of approximately 70% in posting positive earnings surprises. Moreover, historical data shows an average annual return of 28.3% for stocks that meet these criteria over the last decade.

For reference, stocks with a Zacks Rank of #3 are expected to perform in line with market averages. Conversely, those rated #2 (Buy) and #1 (Strong Buy)—the top 15% and 5% of stocks, respectively—are forecasted to outperform the broader market significantly. In particular, Strong Buy stocks are characterized by superior upside potential.

Should You Consider Moderna?

With a foundational understanding of the Earnings ESP, let’s shift our focus to potential investment opportunities. One intriguing option is Moderna (MRNA), currently holding a Zacks Rank of #3 (Hold). The company’s Most Accurate Estimate sits at -$1.80 per share, with its earnings release scheduled for November 7, 2024. Notably, Moderna boasts a positive Earnings ESP of +2.4%, calculated by comparing its Most Accurate Estimate with the consensus estimate of -$1.84.

Investors looking for stocks with favorable Earnings ESPs should explore Moderna further, as it is among numerous medical stocks exhibiting promising ESP figures.

Another Stock to Consider: Tactile Systems Technology

Another noteworthy contender in the Medical sector is Tactile Systems Technology (TCMD), which currently also carries a Zacks Rank of #3 (Hold). TCMD is preparing for its earnings report set for November 4, 2024, with a Most Accurate Estimate of $0.19 per share. The company’s Earnings ESP figure currently stands at +7.04%, derived from the difference between its Most Accurate Estimate and the consensus estimate of $0.18.

Both Moderna and Tactile Systems Technology demonstrate the potential for earnings beats in their upcoming reports. As metrics such as Earnings ESP gain traction among informed investors, these stocks could be valuable additions to any portfolio, particularly for those looking to capitalize on positive earnings surprises in the medical sector.

Conclusion

In summary, earnings reports are crucial to understanding a company’s performance, and both Moderna and Tactile Systems Technology stand out as candidates with potential to outperform expectations. With the incorporation of the Earnings ESP tool and Zacks Rank, investors can better position themselves to benefit from unexpected earnings surprises in the market landscape. Keeping an eye on these stocks ahead of their earnings releases may yield significant rewards.