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How to Find Strong Retail and Wholesale Stocks Slated for Positive Earnings Surprises
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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.
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.
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.
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.
Stocks with a ranking of #3 (Hold), or 60% of all stocks covered by the Zacks Rank, are expected to perform in-line with the broader market. Stocks with rankings of #2 (Buy) and #1 (Strong Buy), 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 McDonald'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. McDonald's (MCD - Free Report) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at $2.83 a share 14 days away from its upcoming earnings release on February 5, 2024.
McDonald's Earnings ESP sits at +0.62%, which, as explained above, is calculated by taking the percentage difference between the $2.83 Most Accurate Estimate and the Zacks Consensus Estimate of $2.81. MCD 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.
MCD 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 Costco (COST - Free Report) as well.
Slated to report earnings on March 7, 2024, Costco holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is $3.57 a share 45 days from its next quarterly update.
The Zacks Consensus Estimate for Costco is $3.56, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +0.25%.
MCD and COST'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 >>
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How to Find Strong Retail and Wholesale Stocks Slated for Positive Earnings Surprises
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.
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.
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.
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.
Stocks with a ranking of #3 (Hold), or 60% of all stocks covered by the Zacks Rank, are expected to perform in-line with the broader market. Stocks with rankings of #2 (Buy) and #1 (Strong Buy), 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 McDonald'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. McDonald's (MCD - Free Report) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at $2.83 a share 14 days away from its upcoming earnings release on February 5, 2024.
McDonald's Earnings ESP sits at +0.62%, which, as explained above, is calculated by taking the percentage difference between the $2.83 Most Accurate Estimate and the Zacks Consensus Estimate of $2.81. MCD 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.
MCD 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 Costco (COST - Free Report) as well.
Slated to report earnings on March 7, 2024, Costco holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is $3.57 a share 45 days from its next quarterly update.
The Zacks Consensus Estimate for Costco is $3.56, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +0.25%.
MCD and COST'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 >>