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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.
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 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.
When we join a positive earnings ESP with a Zacks Rank #3 (Hold) or stronger, stocks posted a positive bottom-line surprise 70% of the time. Plus, this system saw investors produce roughly 28% 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 Home Depot?
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. Home Depot (HD - Free Report) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at $4.61 a share 29 days away from its upcoming earnings release on August 13, 2024.
By taking the percentage difference between the $4.61 Most Accurate Estimate and the $4.59 Zacks Consensus Estimate, Home Depot has an Earnings ESP of +0.44%. Investors should also know that HD 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.
HD is just one of a large group of Retail and Wholesale stocks with a positive ESP figure. Chipotle Mexican Grill (CMG - Free Report) is another qualifying stock you may want to consider.
Chipotle Mexican Grill is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on July 24, 2024. CMG's Most Accurate Estimate sits at $0.31 a share nine days from its next earnings release.
For Chipotle Mexican Grill, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $0.31 is +0.33%.
HD and CMG'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 >>
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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.
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 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.
When we join a positive earnings ESP with a Zacks Rank #3 (Hold) or stronger, stocks posted a positive bottom-line surprise 70% of the time. Plus, this system saw investors produce roughly 28% 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 Home Depot?
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. Home Depot (HD - Free Report) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at $4.61 a share 29 days away from its upcoming earnings release on August 13, 2024.
By taking the percentage difference between the $4.61 Most Accurate Estimate and the $4.59 Zacks Consensus Estimate, Home Depot has an Earnings ESP of +0.44%. Investors should also know that HD 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.
HD is just one of a large group of Retail and Wholesale stocks with a positive ESP figure. Chipotle Mexican Grill (CMG - Free Report) is another qualifying stock you may want to consider.
Chipotle Mexican Grill is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on July 24, 2024. CMG's Most Accurate Estimate sits at $0.31 a share nine days from its next earnings release.
For Chipotle Mexican Grill, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $0.31 is +0.33%.
HD and CMG'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 >>