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How to Find Strong Retail and Wholesale Stocks Slated for Positive Earnings Surprises
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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.
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.
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 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.
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 Ulta Beauty?
The final step today is to look at a stock that meets our ESP qualifications. Ulta Beauty (ULTA - Free Report) earns a #2 (Buy) six days from its next quarterly earnings release on March 9, 2023, and its Most Accurate Estimate comes in at $6 a share.
By taking the percentage difference between the $6 Most Accurate Estimate and the $5.53 Zacks Consensus Estimate, Ulta Beauty has an Earnings ESP of +8.53%. Investors should also know that ULTA is one of a large group 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.
ULTA is one of just a large database of Retail and Wholesale stocks with positive ESPs. Another solid-looking stock is Lowe's (LOW - Free Report) .
Lowe's, which is readying to report earnings on May 17, 2023, sits at a Zacks Rank #3 (Hold) right now. It's Most Accurate Estimate is currently $3.53 a share, and LOW is 75 days out from its next earnings report.
For Lowe's, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $3.52 is +0.28%.
Because both stocks hold a positive Earnings ESP, ULTA and LOW 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 to Find Strong Retail and Wholesale Stocks Slated for Positive Earnings Surprises
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.
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.
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 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.
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 Ulta Beauty?
The final step today is to look at a stock that meets our ESP qualifications. Ulta Beauty (ULTA - Free Report) earns a #2 (Buy) six days from its next quarterly earnings release on March 9, 2023, and its Most Accurate Estimate comes in at $6 a share.
By taking the percentage difference between the $6 Most Accurate Estimate and the $5.53 Zacks Consensus Estimate, Ulta Beauty has an Earnings ESP of +8.53%. Investors should also know that ULTA is one of a large group 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.
ULTA is one of just a large database of Retail and Wholesale stocks with positive ESPs. Another solid-looking stock is Lowe's (LOW - Free Report) .
Lowe's, which is readying to report earnings on May 17, 2023, sits at a Zacks Rank #3 (Hold) right now. It's Most Accurate Estimate is currently $3.53 a share, and LOW is 75 days out from its next earnings report.
For Lowe's, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $3.52 is +0.28%.
Because both stocks hold a positive Earnings ESP, ULTA and LOW 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 >>