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How Investors Can Grab Better Returns for Retail and Wholesale Using the Zacks ESP Screener
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Wall Street watches a company's quarterly report closely to understand as much as possible about its recent performance and what to expect going forward. Of course, one figure often stands out among the rest: earnings.
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 Expected Surprise Prediction, or ESP, works by locking in on the most up-to-date analyst earnings revisions because they can be more accurate than estimates from weeks or even months before the actual release date. The thinking is pretty straightforward: analysts who provide earnings estimates closer to the report are likely to have more information.
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.
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 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 Dick's Sporting Goods?
The final step today is to look at a stock that meets our ESP qualifications. Dick's Sporting Goods (DKS - Free Report) earns a #2 (Buy) 18 days from its next quarterly earnings release on November 22, 2022, and its Most Accurate Estimate comes in at $2.62 a share.
Dick's Sporting Goods' Earnings ESP sits at +17.23%, which, as explained above, is calculated by taking the percentage difference between the $2.62 Most Accurate Estimate and the Zacks Consensus Estimate of $2.24. DKS 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.
DKS 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 McDonald's (MCD - Free Report) as well.
Slated to report earnings on January 26, 2023, McDonald's holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is $2.44 a share 83 days from its next quarterly update.
The Zacks Consensus Estimate for McDonald's is $2.44, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +0.08%.
DKS and MCD's positive ESP metrics may signal that a positive earnings surprise for both stocks is on the horizon.
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 Retail and Wholesale Using the Zacks ESP Screener
Wall Street watches a company's quarterly report closely to understand as much as possible about its recent performance and what to expect going forward. Of course, one figure often stands out among the rest: earnings.
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 Expected Surprise Prediction, or ESP, works by locking in on the most up-to-date analyst earnings revisions because they can be more accurate than estimates from weeks or even months before the actual release date. The thinking is pretty straightforward: analysts who provide earnings estimates closer to the report are likely to have more information.
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.
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 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 Dick's Sporting Goods?
The final step today is to look at a stock that meets our ESP qualifications. Dick's Sporting Goods (DKS - Free Report) earns a #2 (Buy) 18 days from its next quarterly earnings release on November 22, 2022, and its Most Accurate Estimate comes in at $2.62 a share.
Dick's Sporting Goods' Earnings ESP sits at +17.23%, which, as explained above, is calculated by taking the percentage difference between the $2.62 Most Accurate Estimate and the Zacks Consensus Estimate of $2.24. DKS 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.
DKS 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 McDonald's (MCD - Free Report) as well.
Slated to report earnings on January 26, 2023, McDonald's holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is $2.44 a share 83 days from its next quarterly update.
The Zacks Consensus Estimate for McDonald's is $2.44, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +0.08%.
DKS and MCD's positive ESP metrics may signal that a positive earnings surprise for both stocks is on the horizon.
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 >>