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Want Better Returns? Don?t Ignore These 2 Consumer Staples Stocks Set to Beat Earnings

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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.

The earnings figure itself is key, of course, but a beat or miss on the bottom line can sometimes be just as, if not more, important. Therefore, investors should consider paying close attention to these earnings surprises, as a big beat can help a stock climb and vice versa.

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.

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 Clorox?

The final step today is to look at a stock that meets our ESP qualifications. Clorox (CLX - Free Report) earns a #3 (Hold) nine days from its next quarterly earnings release on February 2, 2023, and its Most Accurate Estimate comes in at $0.68 a share.

Clorox's Earnings ESP sits at +4.22%, which, as explained above, is calculated by taking the percentage difference between the $0.68 Most Accurate Estimate and the Zacks Consensus Estimate of $0.65. CLX 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.

CLX is part of a big group of Consumer Staples stocks that boast a positive ESP, and investors may want to take a look at Kimberly-Clark (KMB - Free Report) as well.

Slated to report earnings on January 25, 2023, Kimberly-Clark holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is $1.52 a share one day from its next quarterly update.

The Zacks Consensus Estimate for Kimberly-Clark is $1.50, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +1.2%.

CLX and KMB'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 >>


See More Zacks Research for These Tickers


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Kimberly-Clark Corporation (KMB) - free report >>

The Clorox Company (CLX) - free report >>

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