Earnings season is closely watched on Wall Street because this is when investors gain access to management commentary, which helps them decide which stocks to buy and which to sell. It’s all about projecting the future performance of the company in the context of its most recent quarterly performance.

And it isn’t just about the performance either. Management commentary also includes their analysis of what transpired during the quarter. So for example, softer-than-expected orders would be negative on the face of things, but management could give us reasons such as orders being pushed into the next quarter as opposed to cancellations, which wouldn’t be necessarily as negative. Similarly higher-than-expected orders may not be as great as they appear to be because there may have been pull-ins from the next quarter.

Today, most investors are concerned about the impact of supply chain and labor issues, which are inflating costs and hitting margins. Companies have varying degrees of pricing power to pass this on to customers. So they may be impacted to varying degrees. Management commentary will help us understand how the situation is evolving for each company and the outlook will give us an idea of what the immediate future holds.

In normal situations, there is a direct reaction to this news in the form of share price movements. So prices could go up when things look good for the company and move in the opposite direction when there are negative surprises or other disappointing factors. But the resurgence of the virus and the Fed’s decision to hike interest rates are also important considerations in this earnings season. So there may not always be positive correlation between the results and prices.

This makes the prediction of an outcome somewhat less fruitful because there is less scope from which to uncover information. The Zacks earnings surprise prediction (ESP), in combination with the Zacks Rank, does the job regardless. And here are a few examples you may want to take a look at-

Vertex Pharmaceuticals Inc. VRTX

Vertex Pharmaceuticals discovers, develops and commercializes small molecule drugs targeting serious diseases with particular focus on cystic fibrosis (CF).

Vertex’s #2 (Buy) rank and earnings ESP of 4.98% are indicative of an earnings beat when the company reports on Jan 26. Historically, there seems to have been little correlation between the earnings results and share prices although its Value and Growth scores of B each make it a relatively safe name for investment.

Marten Transport MRTN

Marten Transport offers truckload, dedicated and intermodal trucking services with a focus on the distribution of food and other consumer packaged goods that require a temperature-controlled or insulated environment.