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Zacks Earnings ESP: A Better Way to Find Earnings Surprises for Retail and Wholesale
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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 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.
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.
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 Foot Locker?
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. Foot Locker (FL - Free Report) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at $1.20 a share 24 days away from its upcoming earnings release on November 18, 2022.
FL has an Earnings ESP figure of +9.2%, which, as explained above, is calculated by taking the percentage difference between the $1.20 Most Accurate Estimate and the Zacks Consensus Estimate of $1.10. Foot Locker is one of a large database 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.
FL is one of just a large database of Retail and Wholesale stocks with positive ESPs. Another solid-looking stock is Boot Barn (BOOT - Free Report) .
Boot Barn, which is readying to report earnings on October 26, 2022, sits at a Zacks Rank #3 (Hold) right now. It's Most Accurate Estimate is currently $0.93 a share, and BOOT is one day out from its next earnings report.
The Zacks Consensus Estimate for Boot Barn is $0.91, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +2.01%.
Because both stocks hold a positive Earnings ESP, FL and BOOT 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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Zacks Earnings ESP: A Better Way to Find Earnings Surprises for Retail and Wholesale
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 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.
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.
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 Foot Locker?
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. Foot Locker (FL - Free Report) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at $1.20 a share 24 days away from its upcoming earnings release on November 18, 2022.
FL has an Earnings ESP figure of +9.2%, which, as explained above, is calculated by taking the percentage difference between the $1.20 Most Accurate Estimate and the Zacks Consensus Estimate of $1.10. Foot Locker is one of a large database 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.
FL is one of just a large database of Retail and Wholesale stocks with positive ESPs. Another solid-looking stock is Boot Barn (BOOT - Free Report) .
Boot Barn, which is readying to report earnings on October 26, 2022, sits at a Zacks Rank #3 (Hold) right now. It's Most Accurate Estimate is currently $0.93 a share, and BOOT is one day out from its next earnings report.
The Zacks Consensus Estimate for Boot Barn is $0.91, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +2.01%.
Because both stocks hold a positive Earnings ESP, FL and BOOT 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 >>