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How to Find Strong Retail and Wholesale Stocks Slated for Positive Earnings Surprises
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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.
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 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.
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 Ross Stores?
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. Ross Stores (ROST - Free Report) holds a #2 (Buy) at the moment and its Most Accurate Estimate comes in at $1.56 a share seven days away from its upcoming earnings release on August 15, 2024.
By taking the percentage difference between the $1.56 Most Accurate Estimate and the $1.49 Zacks Consensus Estimate, Ross Stores has an Earnings ESP of +4.71%. Investors should also know that ROST 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.
ROST is just one of a large group of Retail and Wholesale stocks with a positive ESP figure. Etsy (ETSY - Free Report) is another qualifying stock you may want to consider.
Slated to report earnings on November 6, 2024, Etsy holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is $0.56 a share 90 days from its next quarterly update.
The Zacks Consensus Estimate for Etsy is $0.56, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +0.06%.
Because both stocks hold a positive Earnings ESP, ROST and ETSY 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
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.
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 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.
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 Ross Stores?
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. Ross Stores (ROST - Free Report) holds a #2 (Buy) at the moment and its Most Accurate Estimate comes in at $1.56 a share seven days away from its upcoming earnings release on August 15, 2024.
By taking the percentage difference between the $1.56 Most Accurate Estimate and the $1.49 Zacks Consensus Estimate, Ross Stores has an Earnings ESP of +4.71%. Investors should also know that ROST 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.
ROST is just one of a large group of Retail and Wholesale stocks with a positive ESP figure. Etsy (ETSY - Free Report) is another qualifying stock you may want to consider.
Slated to report earnings on November 6, 2024, Etsy holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is $0.56 a share 90 days from its next quarterly update.
The Zacks Consensus Estimate for Etsy is $0.56, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +0.06%.
Because both stocks hold a positive Earnings ESP, ROST and ETSY 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 >>