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These 2 Consumer Staples Stocks Could Beat Earnings: Why They Should Be on Your Radar
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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.
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.
Now that we know how important earnings and earnings surprises are, it's time to show investors how to take advantage of these events to boost their returns by utilizing the Zacks Earnings ESP filter.
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.
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 Clorox?
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. Clorox (CLX - Free Report) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at $0.75 a share 27 days away from its upcoming earnings release on February 2, 2023.
CLX has an Earnings ESP figure of +15.39%, which, as explained above, is calculated by taking the percentage difference between the $0.75 Most Accurate Estimate and the Zacks Consensus Estimate of $0.65. Clorox 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.
CLX is one of just a large database of Consumer Staples stocks with positive ESPs. Another solid-looking stock is Kimberly-Clark (KMB - Free Report) .
Kimberly-Clark is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on January 25, 2023. KMB's Most Accurate Estimate sits at $1.51 a share 19 days from its next earnings release.
Kimberly-Clark's Earnings ESP figure currently stands at +0.8% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $1.50.
Because both stocks hold a positive Earnings ESP, CLX and KMB 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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These 2 Consumer Staples Stocks Could Beat Earnings: Why They Should Be on Your Radar
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.
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.
Now that we know how important earnings and earnings surprises are, it's time to show investors how to take advantage of these events to boost their returns by utilizing the Zacks Earnings ESP filter.
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.
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 Clorox?
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. Clorox (CLX - Free Report) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at $0.75 a share 27 days away from its upcoming earnings release on February 2, 2023.
CLX has an Earnings ESP figure of +15.39%, which, as explained above, is calculated by taking the percentage difference between the $0.75 Most Accurate Estimate and the Zacks Consensus Estimate of $0.65. Clorox 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.
CLX is one of just a large database of Consumer Staples stocks with positive ESPs. Another solid-looking stock is Kimberly-Clark (KMB - Free Report) .
Kimberly-Clark is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on January 25, 2023. KMB's Most Accurate Estimate sits at $1.51 a share 19 days from its next earnings release.
Kimberly-Clark's Earnings ESP figure currently stands at +0.8% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $1.50.
Because both stocks hold a positive Earnings ESP, CLX and KMB 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 >>