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These 2 Consumer Staples Stocks Could Beat Earnings: Why They Should Be on Your Radar

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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.

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 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.

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 e.l.f. Beauty?

The final step today is to look at a stock that meets our ESP qualifications. e.l.f. Beauty (ELF - Free Report) earns a #2 (Buy) 29 days from its next quarterly earnings release on February 7, 2024, and its Most Accurate Estimate comes in at $0.54 a share.

ELF has an Earnings ESP figure of +1.02%, which, as explained above, is calculated by taking the percentage difference between the $0.54 Most Accurate Estimate and the Zacks Consensus Estimate of $0.53. e.l.f. Beauty is one of a large database 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.

ELF is just one of a large group of Consumer Staples stocks with a positive ESP figure. Smucker (SJM - Free Report) is another qualifying stock you may want to consider.

Smucker is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on February 27, 2024. SJM's Most Accurate Estimate sits at $2.30 a share 49 days from its next earnings release.

The Zacks Consensus Estimate for Smucker is $2.27, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +1.36%.

ELF and SJM's positive ESP figures tell us that both stocks have a good chance at beating analyst expectations in their next earnings report.

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


Normally $25 each - click below to receive one report FREE:


The J. M. Smucker Company (SJM) - free report >>

e.l.f. Beauty (ELF) - free report >>

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