We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
How Investors Can Grab Better Returns for Retail and Wholesale Using the Zacks ESP Screener
Read MoreHide Full Article
Quarterly financial reports play a vital role on Wall Street, as they help investors see how a company has performed and what might be coming down the road in the near-term. And out of all of the metrics and results to consider, earnings is one of the most important.
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.
Hunting for 'earnings whispers' or companies poised to beat their quarterly earnings estimates is a somewhat common practice. But that doesn't make it easy. One way that has been proven to work is by using the Zacks Earnings ESP tool.
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.
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.
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 AutoNation?
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. AutoNation (AN - Free Report) earns a #2 (Buy) right now and its Most Accurate Estimate sits at $6.45 a share, just zero days from its upcoming earnings release on July 21, 2022.
AutoNation's Earnings ESP sits at +6.4%, which, as explained above, is calculated by taking the percentage difference between the $6.45 Most Accurate Estimate and the Zacks Consensus Estimate of $6.06. AN is also part of a large group of stocks that boast a positive ESP. All of these qualifying stocks can be filtered by ESP, Zacks Rank, % Surprise (Last Qtr.), and Reporting date.
AN 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 Ulta Beauty (ULTA - Free Report) as well.
Ulta Beauty, which is readying to report earnings on August 24, 2022, sits at a Zacks Rank #1 (Strong Buy) right now. It's Most Accurate Estimate is currently $4.90 a share, and ULTA is 34 days out from its next earnings report.
The Zacks Consensus Estimate for Ulta Beauty is $4.78, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +2.46%.
AN and ULTA'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 >>
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
How Investors Can Grab Better Returns for Retail and Wholesale Using the Zacks ESP Screener
Quarterly financial reports play a vital role on Wall Street, as they help investors see how a company has performed and what might be coming down the road in the near-term. And out of all of the metrics and results to consider, earnings is one of the most important.
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.
Hunting for 'earnings whispers' or companies poised to beat their quarterly earnings estimates is a somewhat common practice. But that doesn't make it easy. One way that has been proven to work is by using the Zacks Earnings ESP tool.
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.
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.
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 AutoNation?
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. AutoNation (AN - Free Report) earns a #2 (Buy) right now and its Most Accurate Estimate sits at $6.45 a share, just zero days from its upcoming earnings release on July 21, 2022.
AutoNation's Earnings ESP sits at +6.4%, which, as explained above, is calculated by taking the percentage difference between the $6.45 Most Accurate Estimate and the Zacks Consensus Estimate of $6.06. AN is also part of a large group of stocks that boast a positive ESP. All of these qualifying stocks can be filtered by ESP, Zacks Rank, % Surprise (Last Qtr.), and Reporting date.
AN 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 Ulta Beauty (ULTA - Free Report) as well.
Ulta Beauty, which is readying to report earnings on August 24, 2022, sits at a Zacks Rank #1 (Strong Buy) right now. It's Most Accurate Estimate is currently $4.90 a share, and ULTA is 34 days out from its next earnings report.
The Zacks Consensus Estimate for Ulta Beauty is $4.78, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +2.46%.
AN and ULTA'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 >>