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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.
We know earnings results are vital, but how a company performs compared to bottom line expectations can be even more important when it comes to stock prices, especially in the near-term. This means that investors might want to take advantage of these earnings surprises.
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, 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.
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.
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 ranking of #3 (Hold), or 60% of all stocks covered by the Zacks Rank, are expected to perform in-line with the broader market. Stocks with rankings of #2 (Buy) and #1 (Strong Buy), 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 Best Buy?
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. Best Buy (BBY - Free Report) earns a #2 (Buy) right now and its Most Accurate Estimate sits at $2.53 a share, just eight days from its upcoming earnings release on February 29, 2024.
By taking the percentage difference between the $2.53 Most Accurate Estimate and the $2.51 Zacks Consensus Estimate, Best Buy has an Earnings ESP of +0.64%. Investors should also know that BBY 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.
BBY 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 Dick's Sporting Goods (DKS - Free Report) as well.
Slated to report earnings on March 14, 2024, Dick's Sporting Goods holds a #2 (Buy) ranking on the Zacks Rank, and it's Most Accurate Estimate is $3.36 a share 22 days from its next quarterly update.
Dick's Sporting Goods' Earnings ESP figure currently stands at +1.08% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $3.33.
BBY and DKS' 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
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.
We know earnings results are vital, but how a company performs compared to bottom line expectations can be even more important when it comes to stock prices, especially in the near-term. This means that investors might want to take advantage of these earnings surprises.
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, 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.
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.
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 ranking of #3 (Hold), or 60% of all stocks covered by the Zacks Rank, are expected to perform in-line with the broader market. Stocks with rankings of #2 (Buy) and #1 (Strong Buy), 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 Best Buy?
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. Best Buy (BBY - Free Report) earns a #2 (Buy) right now and its Most Accurate Estimate sits at $2.53 a share, just eight days from its upcoming earnings release on February 29, 2024.
By taking the percentage difference between the $2.53 Most Accurate Estimate and the $2.51 Zacks Consensus Estimate, Best Buy has an Earnings ESP of +0.64%. Investors should also know that BBY 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.
BBY 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 Dick's Sporting Goods (DKS - Free Report) as well.
Slated to report earnings on March 14, 2024, Dick's Sporting Goods holds a #2 (Buy) ranking on the Zacks Rank, and it's Most Accurate Estimate is $3.36 a share 22 days from its next quarterly update.
Dick's Sporting Goods' Earnings ESP figure currently stands at +1.08% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $3.33.
BBY and DKS' 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 >>