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This 1 Consumer Discretionary Stock Could Beat Earnings: Why It Should Be on Your Radar

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Quarterly financial reports play a vital role on Wall Street, as they help investors see how a company has performed and what might be coming down the road in the near-term. And out of all of the metrics and results to consider, earnings is one of the most important.

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.

The ability to identify stocks that are likely to top quarterly earnings expectations can be profitable, but it's no simple task. Here at Zacks, our Earnings ESP filter helps make things easier.

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.

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.

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 Malibu Boats?

The final step today is to look at a stock that meets our ESP qualifications. Malibu Boats (MBUU - Free Report) earns a #3 (Hold) 24 days from its next quarterly earnings release on November 3, 2022, and its Most Accurate Estimate comes in at $1.80 a share.

Malibu Boats' Earnings ESP sits at +4.65%, which, as explained above, is calculated by taking the percentage difference between the $1.80 Most Accurate Estimate and the Zacks Consensus Estimate of $1.72. MBUU is also part of a large group of stocks that boast a positive ESP. Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they've reported.

MBUU is part of a big group of Consumer Discretionary stocks that boast a positive ESP, and investors may want to take a look at Comcast (CMCSA - Free Report) as well.

Comcast is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on October 27, 2022. CMCSA's Most Accurate Estimate sits at $0.93 a share 17 days from its next earnings release.

The Zacks Consensus Estimate for Comcast is $0.89, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +4.35%.

MBUU and CMCSA'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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Comcast Corporation (CMCSA) - free report >>

Malibu Boats, Inc. (MBUU) - free report >>

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