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Why Investors Need to Take Advantage of These 2 Consumer Discretionary Stocks Now
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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.
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.
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.
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 International Game Technology?
The final step today is to look at a stock that meets our ESP qualifications. International Game Technology (IGT - Free Report) earns a #1 (Strong Buy) one day from its next quarterly earnings release on February 28, 2023, and its Most Accurate Estimate comes in at $0.40 a share.
International Game Technology's Earnings ESP sits at +20%, which, as explained above, is calculated by taking the percentage difference between the $0.40 Most Accurate Estimate and the Zacks Consensus Estimate of $0.33. IGT 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.
IGT is part of a big group of Consumer Discretionary stocks that boast a positive ESP, and investors may want to take a look at Netflix (NFLX - Free Report) as well.
Netflix, which is readying to report earnings on April 18, 2023, sits at a Zacks Rank #2 (Buy) right now. It's Most Accurate Estimate is currently $2.82 a share, and NFLX is 50 days out from its next earnings report.
For Netflix, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $2.81 is +0.24%.
Because both stocks hold a positive Earnings ESP, IGT and NFLX 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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Why Investors Need to Take Advantage of These 2 Consumer Discretionary Stocks Now
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.
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.
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.
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 International Game Technology?
The final step today is to look at a stock that meets our ESP qualifications. International Game Technology (IGT - Free Report) earns a #1 (Strong Buy) one day from its next quarterly earnings release on February 28, 2023, and its Most Accurate Estimate comes in at $0.40 a share.
International Game Technology's Earnings ESP sits at +20%, which, as explained above, is calculated by taking the percentage difference between the $0.40 Most Accurate Estimate and the Zacks Consensus Estimate of $0.33. IGT 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.
IGT is part of a big group of Consumer Discretionary stocks that boast a positive ESP, and investors may want to take a look at Netflix (NFLX - Free Report) as well.
Netflix, which is readying to report earnings on April 18, 2023, sits at a Zacks Rank #2 (Buy) right now. It's Most Accurate Estimate is currently $2.82 a share, and NFLX is 50 days out from its next earnings report.
For Netflix, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $2.81 is +0.24%.
Because both stocks hold a positive Earnings ESP, IGT and NFLX 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 >>