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How to Boost Your Portfolio with Top Retail and Wholesale Stocks Set to Beat Earnings

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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, 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.

Bringing together a positive earnings ESP alongside a Zacks Rank #3 (Hold) or better has helped stocks report a positive earnings surprise 70% of the time. Furthermore, by using these parameters, investors have seen 28.3% 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 Darden Restaurants?

The final step today is to look at a stock that meets our ESP qualifications. Darden Restaurants (DRI - Free Report) earns a #2 (Buy) 13 days from its next quarterly earnings release on June 24, 2021, and its Most Accurate Estimate comes in at $2.06 a share.

DRI has an Earnings ESP figure of 17.46%, which, as explained above, is calculated by taking the percentage difference between the $2.06 Most Accurate Estimate and the Zacks Consensus Estimate of $1.75. Darden Restaurants is one of just a large database of stocks with positive ESPs. These stocks can be filtered by ESP, Zacks Rank, % Surprise (Last Qtr.), and Reporting date.

Now that you know how to use the Zacks Earnings ESP to your advantage, make sure to check out the Earnings ESP Home Page for even more earnings related strategies to create a winning portfolio.

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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