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Zacks Earnings ESP: A Better Way to Find Earnings Surprises for Retail and Wholesale
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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 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.
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.
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 AutoZone?
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. AutoZone (AZO - Free Report) earns a #3 (Hold) right now and its Most Accurate Estimate sits at $25.86 a share, just 29 days from its upcoming earnings release on December 6, 2022.
AutoZone's Earnings ESP sits at +3.21%, which, as explained above, is calculated by taking the percentage difference between the $25.86 Most Accurate Estimate and the Zacks Consensus Estimate of $25.06. AZO 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.
AZO 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.
Slated to report earnings on November 22, 2022, Dick's Sporting Goods holds a #2 (Buy) ranking on the Zacks Rank, and it's Most Accurate Estimate is $2.62 a share 15 days from its next quarterly update.
The Zacks Consensus Estimate for Dick's Sporting Goods is $2.24, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +17.23%.
AZO and DKS' 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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Zacks Earnings ESP: A Better Way to Find Earnings Surprises for Retail and Wholesale
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 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.
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.
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 AutoZone?
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. AutoZone (AZO - Free Report) earns a #3 (Hold) right now and its Most Accurate Estimate sits at $25.86 a share, just 29 days from its upcoming earnings release on December 6, 2022.
AutoZone's Earnings ESP sits at +3.21%, which, as explained above, is calculated by taking the percentage difference between the $25.86 Most Accurate Estimate and the Zacks Consensus Estimate of $25.06. AZO 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.
AZO 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.
Slated to report earnings on November 22, 2022, Dick's Sporting Goods holds a #2 (Buy) ranking on the Zacks Rank, and it's Most Accurate Estimate is $2.62 a share 15 days from its next quarterly update.
The Zacks Consensus Estimate for Dick's Sporting Goods is $2.24, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +17.23%.
AZO and DKS' 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 >>