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Here's How Investors Can Find Strong Retail and Wholesale Stocks with the Zacks ESP Screener
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Two factors often determine stock prices in the long run: earnings and interest rates. Investors can't control the latter, but they can focus on a company's earnings results every quarter.
We know earnings results are vital, but how a company performs compared to bottom line expectations can be even more important when it comes to stock prices, especially in the near-term. This means that investors might want to take advantage of these earnings surprises.
Now that we know how important earnings and earnings surprises are, it's time to show investors how to take advantage of these events to boost their returns by utilizing the Zacks Earnings ESP filter.
The Zacks Earnings ESP, Explained
The Zacks Earnings ESP is more formally known as the Expected Surprise Prediction, and it aims to grab the inside track on the latest analyst estimate revisions ahead of a company's report. The idea is relatively intuitive as a newer projection might be based on more complete information.
The core of the ESP model is comparing the Most Accurate Estimate to the Zacks Consensus Estimate, where the resulting percentage difference between the two equals the Expected Surprise Prediction. The Zacks Rank is also factored into the ESP metric to better help find companies that appear poised to top their next bottom-line consensus estimate, which will hopefully help lift the stock price.
Bringing together a positive earnings ESP alongside a Zacks Rank #3 (Hold) or better has helped stocks report a positive earnings surprise 70% of the time. Furthermore, by using these parameters, investors have seen 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 Kroger?
Now that we understand what the ESP is and how beneficial it can be, let's dive into a stock that currently fits the bill. Kroger (KR - Free Report) earns a #2 (Buy) right now and its Most Accurate Estimate sits at $0.85 a share, just four days from its upcoming earnings release on September 9, 2022.
KR has an Earnings ESP figure of +4.42%, which, as explained above, is calculated by taking the percentage difference between the $0.85 Most Accurate Estimate and the Zacks Consensus Estimate of $0.81. Kroger 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.
KR is one of just a large database of Retail and Wholesale stocks with positive ESPs. Another solid-looking stock is Builders FirstSource (BLDR - Free Report) .
Slated to report earnings on November 3, 2022, Builders FirstSource holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is $3.65 a share 59 days from its next quarterly update.
Builders FirstSource's Earnings ESP figure currently stands at +9.68% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $3.33.
KR and BLDR's positive ESP metrics may signal that a positive earnings surprise for both stocks is on the horizon.
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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Here's How Investors Can Find Strong Retail and Wholesale Stocks with the Zacks ESP Screener
Two factors often determine stock prices in the long run: earnings and interest rates. Investors can't control the latter, but they can focus on a company's earnings results every quarter.
We know earnings results are vital, but how a company performs compared to bottom line expectations can be even more important when it comes to stock prices, especially in the near-term. This means that investors might want to take advantage of these earnings surprises.
Now that we know how important earnings and earnings surprises are, it's time to show investors how to take advantage of these events to boost their returns by utilizing the Zacks Earnings ESP filter.
The Zacks Earnings ESP, Explained
The Zacks Earnings ESP is more formally known as the Expected Surprise Prediction, and it aims to grab the inside track on the latest analyst estimate revisions ahead of a company's report. The idea is relatively intuitive as a newer projection might be based on more complete information.
The core of the ESP model is comparing the Most Accurate Estimate to the Zacks Consensus Estimate, where the resulting percentage difference between the two equals the Expected Surprise Prediction. The Zacks Rank is also factored into the ESP metric to better help find companies that appear poised to top their next bottom-line consensus estimate, which will hopefully help lift the stock price.
Bringing together a positive earnings ESP alongside a Zacks Rank #3 (Hold) or better has helped stocks report a positive earnings surprise 70% of the time. Furthermore, by using these parameters, investors have seen 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 Kroger?
Now that we understand what the ESP is and how beneficial it can be, let's dive into a stock that currently fits the bill. Kroger (KR - Free Report) earns a #2 (Buy) right now and its Most Accurate Estimate sits at $0.85 a share, just four days from its upcoming earnings release on September 9, 2022.
KR has an Earnings ESP figure of +4.42%, which, as explained above, is calculated by taking the percentage difference between the $0.85 Most Accurate Estimate and the Zacks Consensus Estimate of $0.81. Kroger 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.
KR is one of just a large database of Retail and Wholesale stocks with positive ESPs. Another solid-looking stock is Builders FirstSource (BLDR - Free Report) .
Slated to report earnings on November 3, 2022, Builders FirstSource holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is $3.65 a share 59 days from its next quarterly update.
Builders FirstSource's Earnings ESP figure currently stands at +9.68% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $3.33.
KR and BLDR's positive ESP metrics may signal that a positive earnings surprise for both stocks is on the horizon.
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 >>