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How Investors Can Grab Better Returns for Consumer Staples 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.
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.
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.
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.
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.
Most stocks, about 60%, fall into the #3 (Hold) category, and they are expected to perform in-line with the broader market. Stocks with a #2 (Buy) and #1 (Strong Buy) rating, or the top 15% and top 5% of stocks, respectively, should outperform the market, with Strong Buy stocks outperforming more than any other rank.
Should You Consider Constellation Brands?
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. Constellation Brands (STZ - Free Report) earns a #3 (Hold) right now and its Most Accurate Estimate sits at $3.02 a share, just 30 days from its upcoming earnings release on October 6, 2022.
STZ has an Earnings ESP figure of +9.42%, which, as explained above, is calculated by taking the percentage difference between the $3.02 Most Accurate Estimate and the Zacks Consensus Estimate of $2.76. Constellation Brands 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.
STZ is just one of a large group of Consumer Staples stocks with a positive ESP figure. Philip Morris (PM - Free Report) is another qualifying stock you may want to consider.
Slated to report earnings on October 18, 2022, Philip Morris holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is $1.46 a share 42 days from its next quarterly update.
The Zacks Consensus Estimate for Philip Morris is $1.40, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +4.18%.
Because both stocks hold a positive Earnings ESP, STZ and PM could potentially post earnings beats in their next reports.
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 Consumer Staples 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.
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.
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.
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.
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.
Most stocks, about 60%, fall into the #3 (Hold) category, and they are expected to perform in-line with the broader market. Stocks with a #2 (Buy) and #1 (Strong Buy) rating, or the top 15% and top 5% of stocks, respectively, should outperform the market, with Strong Buy stocks outperforming more than any other rank.
Should You Consider Constellation Brands?
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. Constellation Brands (STZ - Free Report) earns a #3 (Hold) right now and its Most Accurate Estimate sits at $3.02 a share, just 30 days from its upcoming earnings release on October 6, 2022.
STZ has an Earnings ESP figure of +9.42%, which, as explained above, is calculated by taking the percentage difference between the $3.02 Most Accurate Estimate and the Zacks Consensus Estimate of $2.76. Constellation Brands 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.
STZ is just one of a large group of Consumer Staples stocks with a positive ESP figure. Philip Morris (PM - Free Report) is another qualifying stock you may want to consider.
Slated to report earnings on October 18, 2022, Philip Morris holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is $1.46 a share 42 days from its next quarterly update.
The Zacks Consensus Estimate for Philip Morris is $1.40, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +4.18%.
Because both stocks hold a positive Earnings ESP, STZ and PM could potentially post earnings beats in their next reports.
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 >>