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Want Better Returns? Don?t Ignore These 2 Retail and Wholesale Stocks Set to Beat Earnings

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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.

Life and the stock market are both about expectations, and rising above what is expected is often rewarded, while falling short can come with negative consequences. Investors might want to try to capture stronger returns by finding positive 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.

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.

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 Wayfair?

The final step today is to look at a stock that meets our ESP qualifications. Wayfair (W) earns a #3 (Hold) 17 days from its next quarterly earnings release on May 2, 2024, and its Most Accurate Estimate comes in at -$0.34 a share.

Wayfair's Earnings ESP sits at +25.94%, which, as explained above, is calculated by taking the percentage difference between the -$0.34 Most Accurate Estimate and the Zacks Consensus Estimate of -$0.45. W 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.

W is one of just a large database of Retail and Wholesale stocks with positive ESPs. Another solid-looking stock is Cava Group (CAVA).

Slated to report earnings on May 27, 2024, Cava Group holds a #2 (Buy) ranking on the Zacks Rank, and it's Most Accurate Estimate is $0.05 a share 42 days from its next quarterly update.

For Cava Group, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $0.02 is +118.75%.

W and CAVA'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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