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Here's How Investors Can Find Strong Retail and Wholesale Stocks with the Zacks ESP Screener
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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.
The earnings figure itself is key, of course, but a beat or miss on the bottom line can sometimes be just as, if not more, important. Therefore, investors should consider paying close attention to these earnings surprises, as a big beat can help a stock climb and vice versa.
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.
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.
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 Lowe's?
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. Lowe's (LOW - Free Report) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at $3.14 a share one day away from its upcoming earnings release on November 16, 2022.
Lowe's Earnings ESP sits at +1.12%, which, as explained above, is calculated by taking the percentage difference between the $3.14 Most Accurate Estimate and the Zacks Consensus Estimate of $3.11. LOW 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.
LOW is one of just a large database of Retail and Wholesale stocks with positive ESPs. Another solid-looking stock is Chipotle Mexican Grill (CMG - Free Report) .
Slated to report earnings on February 14, 2023, Chipotle Mexican Grill holds a #2 (Buy) ranking on the Zacks Rank, and it's Most Accurate Estimate is $8.84 a share 91 days from its next quarterly update.
The Zacks Consensus Estimate for Chipotle Mexican Grill is $8.80, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +0.46%.
Because both stocks hold a positive Earnings ESP, LOW and CMG 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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Here's How Investors Can Find Strong Retail and Wholesale Stocks with 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.
The earnings figure itself is key, of course, but a beat or miss on the bottom line can sometimes be just as, if not more, important. Therefore, investors should consider paying close attention to these earnings surprises, as a big beat can help a stock climb and vice versa.
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.
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.
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 Lowe's?
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. Lowe's (LOW - Free Report) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at $3.14 a share one day away from its upcoming earnings release on November 16, 2022.
Lowe's Earnings ESP sits at +1.12%, which, as explained above, is calculated by taking the percentage difference between the $3.14 Most Accurate Estimate and the Zacks Consensus Estimate of $3.11. LOW 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.
LOW is one of just a large database of Retail and Wholesale stocks with positive ESPs. Another solid-looking stock is Chipotle Mexican Grill (CMG - Free Report) .
Slated to report earnings on February 14, 2023, Chipotle Mexican Grill holds a #2 (Buy) ranking on the Zacks Rank, and it's Most Accurate Estimate is $8.84 a share 91 days from its next quarterly update.
The Zacks Consensus Estimate for Chipotle Mexican Grill is $8.80, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +0.46%.
Because both stocks hold a positive Earnings ESP, LOW and CMG 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 >>