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This 1 Consumer Discretionary Stock Could Beat Earnings: Why It Should Be on Your Radar
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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.
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 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.
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 Live Nation?
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. Live Nation (LYV - Free Report) holds a #1 (Strong Buy) at the moment and its Most Accurate Estimate comes in at $1.17 a share 21 days away from its upcoming earnings release on November 3, 2022.
Live Nation's Earnings ESP sits at +6.69%, which, as explained above, is calculated by taking the percentage difference between the $1.17 Most Accurate Estimate and the Zacks Consensus Estimate of $1.09. LYV 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.
LYV is part of a big group of Consumer Discretionary stocks that boast a positive ESP, and investors may want to take a look at Ralph Lauren (RL - Free Report) as well.
Slated to report earnings on November 1, 2022, Ralph Lauren holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is $2.08 a share 19 days from its next quarterly update.
Ralph Lauren's Earnings ESP figure currently stands at +0.08% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $2.07.
Because both stocks hold a positive Earnings ESP, LYV and RL 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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This 1 Consumer Discretionary Stock Could Beat Earnings: Why It Should Be on Your Radar
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.
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 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.
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 Live Nation?
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. Live Nation (LYV - Free Report) holds a #1 (Strong Buy) at the moment and its Most Accurate Estimate comes in at $1.17 a share 21 days away from its upcoming earnings release on November 3, 2022.
Live Nation's Earnings ESP sits at +6.69%, which, as explained above, is calculated by taking the percentage difference between the $1.17 Most Accurate Estimate and the Zacks Consensus Estimate of $1.09. LYV 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.
LYV is part of a big group of Consumer Discretionary stocks that boast a positive ESP, and investors may want to take a look at Ralph Lauren (RL - Free Report) as well.
Slated to report earnings on November 1, 2022, Ralph Lauren holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is $2.08 a share 19 days from its next quarterly update.
Ralph Lauren's Earnings ESP figure currently stands at +0.08% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $2.07.
Because both stocks hold a positive Earnings ESP, LYV and RL 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 >>