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How Investors Can Grab Better Returns for Retail and Wholesale Using the Zacks ESP Screener
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Wall Street watches a company's quarterly report closely to understand as much as possible about its recent performance and what to expect going forward. Of course, one figure often stands out among the rest: earnings.
The earnings figure itself is key, of course, but a beat or miss on the bottom line can sometimes be just as, if not more, important. Therefore, investors should consider paying close attention to these earnings surprises, as a big beat can help a stock climb and vice versa.
Hunting for 'earnings whispers' or companies poised to beat their quarterly earnings estimates is a somewhat common practice. But that doesn't make it easy. One way that has been proven to work is by using the Zacks Earnings ESP tool.
The Zacks Earnings ESP, Explained
The Zacks Expected Surprise Prediction, or ESP, works by locking in on the most up-to-date analyst earnings revisions because they can be more accurate than estimates from weeks or even months before the actual release date. The thinking is pretty straightforward: analysts who provide earnings estimates closer to the report are likely to have more information.
Now that we understand the basic idea, let's look at how the Expected Surprise Prediction works. 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 figure.
When we join a positive earnings ESP with a Zacks Rank #3 (Hold) or stronger, stocks posted a positive bottom-line surprise 70% of the time. Plus, this system saw investors produce roughly 28% annual returns on average, according to our 10 year backtest.
Stocks with a ranking of #3 (Hold), or 60% of all stocks covered by the Zacks Rank, are expected to perform in-line with the broader market. Stocks with rankings of #2 (Buy) and #1 (Strong Buy), or the top 15% and top 5% of stocks, respectively, should outperform the market; Strong Buy stocks should outperform more than any other rank.
Should You Consider Dollar Tree?
The last thing we will do today, now that we have a grasp on the ESP and how powerful of a tool it can be, is to quickly look at a qualifying stock. Dollar Tree (DLTR - Free Report) holds a #2 (Buy) at the moment and its Most Accurate Estimate comes in at $1.60 a share eight days away from its upcoming earnings release on August 25, 2022.
By taking the percentage difference between the $1.60 Most Accurate Estimate and the $1.57 Zacks Consensus Estimate, Dollar Tree has an Earnings ESP of +1.75%. Investors should also know that DLTR is one of a large group of stocks with positive ESPs. Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they've reported.
DLTR is just one of a large group of Retail and Wholesale stocks with a positive ESP figure. MercadoLibre (MELI - Free Report) is another qualifying stock you may want to consider.
MercadoLibre is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on November 3, 2022. MELI's Most Accurate Estimate sits at $2.39 a share 78 days from its next earnings release.
The Zacks Consensus Estimate for MercadoLibre is $2.33, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +2.47%.
DLTR and MELI's positive ESP figures tell us that both stocks have a good chance at beating analyst expectations in their next earnings report.
Find Stocks to Buy or Sell Before They're Reported
Use the Zacks Earnings ESP Filter to turn up stocks with the highest probability of positively, or negatively, surprising to buy or sell before they're reported for profitable earnings season trading. Check it out here >>
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How Investors Can Grab Better Returns for Retail and Wholesale Using the Zacks ESP Screener
Wall Street watches a company's quarterly report closely to understand as much as possible about its recent performance and what to expect going forward. Of course, one figure often stands out among the rest: earnings.
The earnings figure itself is key, of course, but a beat or miss on the bottom line can sometimes be just as, if not more, important. Therefore, investors should consider paying close attention to these earnings surprises, as a big beat can help a stock climb and vice versa.
Hunting for 'earnings whispers' or companies poised to beat their quarterly earnings estimates is a somewhat common practice. But that doesn't make it easy. One way that has been proven to work is by using the Zacks Earnings ESP tool.
The Zacks Earnings ESP, Explained
The Zacks Expected Surprise Prediction, or ESP, works by locking in on the most up-to-date analyst earnings revisions because they can be more accurate than estimates from weeks or even months before the actual release date. The thinking is pretty straightforward: analysts who provide earnings estimates closer to the report are likely to have more information.
Now that we understand the basic idea, let's look at how the Expected Surprise Prediction works. 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 figure.
When we join a positive earnings ESP with a Zacks Rank #3 (Hold) or stronger, stocks posted a positive bottom-line surprise 70% of the time. Plus, this system saw investors produce roughly 28% annual returns on average, according to our 10 year backtest.
Stocks with a ranking of #3 (Hold), or 60% of all stocks covered by the Zacks Rank, are expected to perform in-line with the broader market. Stocks with rankings of #2 (Buy) and #1 (Strong Buy), or the top 15% and top 5% of stocks, respectively, should outperform the market; Strong Buy stocks should outperform more than any other rank.
Should You Consider Dollar Tree?
The last thing we will do today, now that we have a grasp on the ESP and how powerful of a tool it can be, is to quickly look at a qualifying stock. Dollar Tree (DLTR - Free Report) holds a #2 (Buy) at the moment and its Most Accurate Estimate comes in at $1.60 a share eight days away from its upcoming earnings release on August 25, 2022.
By taking the percentage difference between the $1.60 Most Accurate Estimate and the $1.57 Zacks Consensus Estimate, Dollar Tree has an Earnings ESP of +1.75%. Investors should also know that DLTR is one of a large group of stocks with positive ESPs. Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they've reported.
DLTR is just one of a large group of Retail and Wholesale stocks with a positive ESP figure. MercadoLibre (MELI - Free Report) is another qualifying stock you may want to consider.
MercadoLibre is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on November 3, 2022. MELI's Most Accurate Estimate sits at $2.39 a share 78 days from its next earnings release.
The Zacks Consensus Estimate for MercadoLibre is $2.33, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +2.47%.
DLTR and MELI's positive ESP figures tell us that both stocks have a good chance at beating analyst expectations in their next earnings report.
Find Stocks to Buy or Sell Before They're Reported
Use the Zacks Earnings ESP Filter to turn up stocks with the highest probability of positively, or negatively, surprising to buy or sell before they're reported for profitable earnings season trading. Check it out here >>