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These 2 Retail and Wholesale Stocks Could Beat Earnings: Why They Should Be on Your Radar

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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.

We know earnings results are vital, but how a company performs compared to bottom line expectations can be even more important when it comes to stock prices, especially in the near-term. This means that investors might want to take advantage of these 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.

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 TJX?

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. TJX (TJX - Free Report) holds a #2 (Buy) at the moment and its Most Accurate Estimate comes in at $1 a share 19 days away from its upcoming earnings release on November 15, 2023.

TJX's Earnings ESP sits at +3.22%, which, as explained above, is calculated by taking the percentage difference between the $1 Most Accurate Estimate and the Zacks Consensus Estimate of $0.97. TJX 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.

TJX 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 Build-A-Bear (BBW - Free Report) as well.

Build-A-Bear, which is readying to report earnings on November 29, 2023, sits at a Zacks Rank #2 (Buy) right now. It's Most Accurate Estimate is currently $0.51 a share, and BBW is 33 days out from its next earnings report.

The Zacks Consensus Estimate for Build-A-Bear is $0.51, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +0.66%.

TJX and BBW's positive ESP figures tell us that both stocks have a good chance at beating analyst expectations in their next earnings report.

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 >>


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


The TJX Companies, Inc. (TJX) - free report >>

Build-A-Bear Workshop, Inc. (BBW) - free report >>

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