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Zacks Earnings ESP: A Better Way to Find Earnings Surprises for Retail and Wholesale
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Earnings are arguably the most important single number on a company's quarterly financial report. Wall Street clearly dives into all of the other metrics and management's input, but the EPS figure helps cut through all the noise.
Life and the stock market are both about expectations, and rising above what is expected is often rewarded, while falling short can come with negative consequences. Investors might want to try to capture stronger returns by finding positive earnings surprises.
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 Earnings ESP, or Expected Surprise Prediction, aims to find earnings surprises by focusing on the most recent analyst revisions. The basic premise is that if an analyst reevaluates their earnings estimate ahead of an earnings release, it means they likely have new information that could possibly be more accurate.
With this in mind, the Expected Surprise Prediction compares the Most Accurate Estimate (being the most recent) against the overall Zacks Consensus Estimate. The percentage difference provides the ESP figure. The system also utilizes our core Zacks Rank to provide a stronger system for identifying stocks that might beat their next quarterly earnings estimate and possibly see the stock price climb.
In fact, when we combined a Zacks Rank #3 (Hold) or better and a positive Earnings ESP, stocks produced a positive surprise 70% of the time. Perhaps most importantly, using these parameters has helped produce 28.3% annual returns on average, according to our 10 year backtest.
Stocks with a #3 (Hold) ranking, which is most stocks covered at 60%, are expected to perform in-line with the broader market. But stocks that fall into the #2 (Buy) and #1 (Strong Buy) ranking, 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 General?
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 General (DG - Free Report) holds a #2 (Buy) at the moment and its Most Accurate Estimate comes in at $2.96 a share one day away from its upcoming earnings release on August 25, 2022.
DG has an Earnings ESP figure of +1.09%, which, as explained above, is calculated by taking the percentage difference between the $2.96 Most Accurate Estimate and the Zacks Consensus Estimate of $2.93. Dollar General is one of a large database 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.
DG is part of a big group of Retail and Wholesale stocks that boast a positive ESP, and investors may want to take a look at Dick's Sporting Goods (DKS - Free Report) as well.
Dick's Sporting Goods, which is readying to report earnings on November 22, 2022, sits at a Zacks Rank #3 (Hold) right now. It's Most Accurate Estimate is currently $2.47 a share, and DKS is 90 days out from its next earnings report.
The Zacks Consensus Estimate for Dick's Sporting Goods is $2.05, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +20.74%.
DG and DKS' 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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Zacks Earnings ESP: A Better Way to Find Earnings Surprises for Retail and Wholesale
Earnings are arguably the most important single number on a company's quarterly financial report. Wall Street clearly dives into all of the other metrics and management's input, but the EPS figure helps cut through all the noise.
Life and the stock market are both about expectations, and rising above what is expected is often rewarded, while falling short can come with negative consequences. Investors might want to try to capture stronger returns by finding positive earnings surprises.
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 Earnings ESP, or Expected Surprise Prediction, aims to find earnings surprises by focusing on the most recent analyst revisions. The basic premise is that if an analyst reevaluates their earnings estimate ahead of an earnings release, it means they likely have new information that could possibly be more accurate.
With this in mind, the Expected Surprise Prediction compares the Most Accurate Estimate (being the most recent) against the overall Zacks Consensus Estimate. The percentage difference provides the ESP figure. The system also utilizes our core Zacks Rank to provide a stronger system for identifying stocks that might beat their next quarterly earnings estimate and possibly see the stock price climb.
In fact, when we combined a Zacks Rank #3 (Hold) or better and a positive Earnings ESP, stocks produced a positive surprise 70% of the time. Perhaps most importantly, using these parameters has helped produce 28.3% annual returns on average, according to our 10 year backtest.
Stocks with a #3 (Hold) ranking, which is most stocks covered at 60%, are expected to perform in-line with the broader market. But stocks that fall into the #2 (Buy) and #1 (Strong Buy) ranking, 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 General?
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 General (DG - Free Report) holds a #2 (Buy) at the moment and its Most Accurate Estimate comes in at $2.96 a share one day away from its upcoming earnings release on August 25, 2022.
DG has an Earnings ESP figure of +1.09%, which, as explained above, is calculated by taking the percentage difference between the $2.96 Most Accurate Estimate and the Zacks Consensus Estimate of $2.93. Dollar General is one of a large database 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.
DG is part of a big group of Retail and Wholesale stocks that boast a positive ESP, and investors may want to take a look at Dick's Sporting Goods (DKS - Free Report) as well.
Dick's Sporting Goods, which is readying to report earnings on November 22, 2022, sits at a Zacks Rank #3 (Hold) right now. It's Most Accurate Estimate is currently $2.47 a share, and DKS is 90 days out from its next earnings report.
The Zacks Consensus Estimate for Dick's Sporting Goods is $2.05, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +20.74%.
DG and DKS' 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 >>