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These 2 Retail and Wholesale Stocks Could Beat Earnings: Why They Should Be on Your Radar
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Two factors often determine stock prices in the long run: earnings and interest rates. Investors can't control the latter, but they can focus on a company's earnings results every quarter.
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, or Expected Surprise Prediction, aims to find earnings surprises by focusing on the most recent analyst revisions. The basic premise is that if an analyst reevaluates their earnings estimate ahead of an earnings release, it means they likely have new information that could possibly be more accurate.
The core of the ESP model is comparing the Most Accurate Estimate to the Zacks Consensus Estimate, where the resulting percentage difference between the two equals the Expected Surprise Prediction. The Zacks Rank is also factored into the ESP metric to better help find companies that appear poised to top their next bottom-line consensus estimate, which will hopefully help lift the stock price.
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.
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 Chipotle Mexican Grill?
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. Chipotle Mexican Grill (CMG - Free Report) earns a #3 (Hold) right now and its Most Accurate Estimate sits at $0.32 a share, just five days from its upcoming earnings release on July 24, 2024.
Chipotle Mexican Grill's Earnings ESP sits at +0.83%, which, as explained above, is calculated by taking the percentage difference between the $0.32 Most Accurate Estimate and the Zacks Consensus Estimate of $0.31. CMG 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.
CMG 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 Costco (COST - Free Report) as well.
Costco is a Zacks Rank #2 (Buy) stock, and is getting ready to report earnings on September 24, 2024. COST's Most Accurate Estimate sits at $5.06 a share 67 days from its next earnings release.
The Zacks Consensus Estimate for Costco is $5.02, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +0.73%.
CMG and COST'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 >>
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These 2 Retail and Wholesale Stocks Could Beat Earnings: Why They Should Be on Your Radar
Two factors often determine stock prices in the long run: earnings and interest rates. Investors can't control the latter, but they can focus on a company's earnings results every quarter.
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, or Expected Surprise Prediction, aims to find earnings surprises by focusing on the most recent analyst revisions. The basic premise is that if an analyst reevaluates their earnings estimate ahead of an earnings release, it means they likely have new information that could possibly be more accurate.
The core of the ESP model is comparing the Most Accurate Estimate to the Zacks Consensus Estimate, where the resulting percentage difference between the two equals the Expected Surprise Prediction. The Zacks Rank is also factored into the ESP metric to better help find companies that appear poised to top their next bottom-line consensus estimate, which will hopefully help lift the stock price.
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.
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 Chipotle Mexican Grill?
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. Chipotle Mexican Grill (CMG - Free Report) earns a #3 (Hold) right now and its Most Accurate Estimate sits at $0.32 a share, just five days from its upcoming earnings release on July 24, 2024.
Chipotle Mexican Grill's Earnings ESP sits at +0.83%, which, as explained above, is calculated by taking the percentage difference between the $0.32 Most Accurate Estimate and the Zacks Consensus Estimate of $0.31. CMG 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.
CMG 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 Costco (COST - Free Report) as well.
Costco is a Zacks Rank #2 (Buy) stock, and is getting ready to report earnings on September 24, 2024. COST's Most Accurate Estimate sits at $5.06 a share 67 days from its next earnings release.
The Zacks Consensus Estimate for Costco is $5.02, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +0.73%.
CMG and COST'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 >>