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Why Investors Need to Take Advantage of These 2 Consumer Staples Stocks Now
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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.
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 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.
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 #3 (Hold) ranking, which is most stocks covered at 60%, are expected to perform in-line with the broader market. But stocks that fall into the #2 (Buy) and #1 (Strong Buy) ranking, 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 Philip Morris?
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. Philip Morris (PM - Free Report) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at $1.45 a share 30 days away from its upcoming earnings release on February 8, 2024.
By taking the percentage difference between the $1.45 Most Accurate Estimate and the $1.43 Zacks Consensus Estimate, Philip Morris has an Earnings ESP of +1.05%. Investors should also know that PM is one of a large group 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.
PM is part of a big group of Consumer Staples stocks that boast a positive ESP, and investors may want to take a look at Chewy (CHWY - Free Report) as well.
Slated to report earnings on March 27, 2024, Chewy holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is $0.11 a share 78 days from its next quarterly update.
For Chewy, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $0.10 is +10%.
Because both stocks hold a positive Earnings ESP, PM and CHWY 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 Staples Stocks Now
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.
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 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.
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 #3 (Hold) ranking, which is most stocks covered at 60%, are expected to perform in-line with the broader market. But stocks that fall into the #2 (Buy) and #1 (Strong Buy) ranking, 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 Philip Morris?
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. Philip Morris (PM - Free Report) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at $1.45 a share 30 days away from its upcoming earnings release on February 8, 2024.
By taking the percentage difference between the $1.45 Most Accurate Estimate and the $1.43 Zacks Consensus Estimate, Philip Morris has an Earnings ESP of +1.05%. Investors should also know that PM is one of a large group 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.
PM is part of a big group of Consumer Staples stocks that boast a positive ESP, and investors may want to take a look at Chewy (CHWY - Free Report) as well.
Slated to report earnings on March 27, 2024, Chewy holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is $0.11 a share 78 days from its next quarterly update.
For Chewy, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $0.10 is +10%.
Because both stocks hold a positive Earnings ESP, PM and CHWY 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 >>