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How Investors Can Grab Better Returns for Consumer Discretionary Using the Zacks ESP Screener
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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.
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 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.
With this in mind, the Expected Surprise Prediction compares the Most Accurate Estimate (being the most recent) against the overall Zacks Consensus Estimate. The percentage difference provides the ESP figure. The system also utilizes our core Zacks Rank to provide a stronger system for identifying stocks that might beat their next quarterly earnings estimate and possibly see the stock price climb.
In fact, when we combined a Zacks Rank #3 (Hold) or better and a positive Earnings ESP, stocks produced a positive surprise 70% of the time. Perhaps most importantly, using these parameters has helped produce 28.3% annual returns on average, according to our 10 year backtest.
Stocks with a #3 (Hold) ranking, which is most stocks covered at 60%, are expected to perform in-line with the broader market. But stocks that fall into the #2 (Buy) and #1 (Strong Buy) ranking, 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 Marriott International?
The final step today is to look at a stock that meets our ESP qualifications. Marriott International (MAR - Free Report) earns a #2 (Buy) four days from its next quarterly earnings release on August 2, 2022, and its Most Accurate Estimate comes in at $1.70 a share.
Marriott International's Earnings ESP sits at +7.11%, which, as explained above, is calculated by taking the percentage difference between the $1.70 Most Accurate Estimate and the Zacks Consensus Estimate of $1.59. MAR 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.
MAR is one of just a large database of Consumer Discretionary stocks with positive ESPs. Another solid-looking stock is Legget & Platt (LEG - Free Report) .
Slated to report earnings on August 1, 2022, Legget & Platt holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is $0.73 a share three days from its next quarterly update.
Legget & Platt's Earnings ESP figure currently stands at +4.29% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $0.70.
MAR and LEG'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 >>
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How Investors Can Grab Better Returns for Consumer Discretionary Using the Zacks ESP Screener
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.
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 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.
With this in mind, the Expected Surprise Prediction compares the Most Accurate Estimate (being the most recent) against the overall Zacks Consensus Estimate. The percentage difference provides the ESP figure. The system also utilizes our core Zacks Rank to provide a stronger system for identifying stocks that might beat their next quarterly earnings estimate and possibly see the stock price climb.
In fact, when we combined a Zacks Rank #3 (Hold) or better and a positive Earnings ESP, stocks produced a positive surprise 70% of the time. Perhaps most importantly, using these parameters has helped produce 28.3% annual returns on average, according to our 10 year backtest.
Stocks with a #3 (Hold) ranking, which is most stocks covered at 60%, are expected to perform in-line with the broader market. But stocks that fall into the #2 (Buy) and #1 (Strong Buy) ranking, 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 Marriott International?
The final step today is to look at a stock that meets our ESP qualifications. Marriott International (MAR - Free Report) earns a #2 (Buy) four days from its next quarterly earnings release on August 2, 2022, and its Most Accurate Estimate comes in at $1.70 a share.
Marriott International's Earnings ESP sits at +7.11%, which, as explained above, is calculated by taking the percentage difference between the $1.70 Most Accurate Estimate and the Zacks Consensus Estimate of $1.59. MAR 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.
MAR is one of just a large database of Consumer Discretionary stocks with positive ESPs. Another solid-looking stock is Legget & Platt (LEG - Free Report) .
Slated to report earnings on August 1, 2022, Legget & Platt holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is $0.73 a share three days from its next quarterly update.
Legget & Platt's Earnings ESP figure currently stands at +4.29% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $0.70.
MAR and LEG'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 >>