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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.
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 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.
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 Coca-Cola?
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. Coca-Cola (KO - Free Report) holds a #2 (Buy) at the moment and its Most Accurate Estimate comes in at $0.49 a share 12 days away from its upcoming earnings release on February 13, 2024.
By taking the percentage difference between the $0.49 Most Accurate Estimate and the $0.48 Zacks Consensus Estimate, Coca-Cola has an Earnings ESP of +0.7%. Investors should also know that KO 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.
KO is just one of a large group of Consumer Staples stocks with a positive ESP figure. Mondelez (MDLZ - Free Report) is another qualifying stock you may want to consider.
Slated to report earnings on April 25, 2024, Mondelez holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is $0.89 a share 84 days from its next quarterly update.
The Zacks Consensus Estimate for Mondelez is $0.88, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +0.28%.
Because both stocks hold a positive Earnings ESP, KO and MDLZ 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.
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 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.
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 Coca-Cola?
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. Coca-Cola (KO - Free Report) holds a #2 (Buy) at the moment and its Most Accurate Estimate comes in at $0.49 a share 12 days away from its upcoming earnings release on February 13, 2024.
By taking the percentage difference between the $0.49 Most Accurate Estimate and the $0.48 Zacks Consensus Estimate, Coca-Cola has an Earnings ESP of +0.7%. Investors should also know that KO 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.
KO is just one of a large group of Consumer Staples stocks with a positive ESP figure. Mondelez (MDLZ - Free Report) is another qualifying stock you may want to consider.
Slated to report earnings on April 25, 2024, Mondelez holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is $0.89 a share 84 days from its next quarterly update.
The Zacks Consensus Estimate for Mondelez is $0.88, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +0.28%.
Because both stocks hold a positive Earnings ESP, KO and MDLZ 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 >>