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Why Investors Need to Take Advantage of These 2 Consumer Discretionary Stocks Now
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Wall Street watches a company's quarterly report closely to understand as much as possible about its recent performance and what to expect going forward. Of course, one figure often stands out among the rest: earnings.
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, or Expected Surprise Prediction, aims to find earnings surprises by focusing on the most recent analyst revisions. The basic premise is that if an analyst reevaluates their earnings estimate ahead of an earnings release, it means they likely have new information that could possibly be more accurate.
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 Ralph Lauren?
The final step today is to look at a stock that meets our ESP qualifications. Ralph Lauren (RL - Free Report) earns a #3 (Hold) nine days from its next quarterly earnings release on May 23, 2024, and its Most Accurate Estimate comes in at $1.66 a share.
By taking the percentage difference between the $1.66 Most Accurate Estimate and the $1.65 Zacks Consensus Estimate, Ralph Lauren has an Earnings ESP of +0.73%. Investors should also know that RL 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.
RL is just one of a large group of Consumer Discretionary stocks with a positive ESP figure. AMC Entertainment (AMC - Free Report) is another qualifying stock you may want to consider.
AMC Entertainment is a Zacks Rank #2 (Buy) stock, and is getting ready to report earnings on August 13, 2024. AMC's Most Accurate Estimate sits at -$0.23 a share 91 days from its next earnings release.
The Zacks Consensus Estimate for AMC Entertainment is -$0.31, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +25.2%.
RL and AMC'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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Why Investors Need to Take Advantage of These 2 Consumer Discretionary Stocks Now
Wall Street watches a company's quarterly report closely to understand as much as possible about its recent performance and what to expect going forward. Of course, one figure often stands out among the rest: earnings.
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, or Expected Surprise Prediction, aims to find earnings surprises by focusing on the most recent analyst revisions. The basic premise is that if an analyst reevaluates their earnings estimate ahead of an earnings release, it means they likely have new information that could possibly be more accurate.
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 Ralph Lauren?
The final step today is to look at a stock that meets our ESP qualifications. Ralph Lauren (RL - Free Report) earns a #3 (Hold) nine days from its next quarterly earnings release on May 23, 2024, and its Most Accurate Estimate comes in at $1.66 a share.
By taking the percentage difference between the $1.66 Most Accurate Estimate and the $1.65 Zacks Consensus Estimate, Ralph Lauren has an Earnings ESP of +0.73%. Investors should also know that RL 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.
RL is just one of a large group of Consumer Discretionary stocks with a positive ESP figure. AMC Entertainment (AMC - Free Report) is another qualifying stock you may want to consider.
AMC Entertainment is a Zacks Rank #2 (Buy) stock, and is getting ready to report earnings on August 13, 2024. AMC's Most Accurate Estimate sits at -$0.23 a share 91 days from its next earnings release.
The Zacks Consensus Estimate for AMC Entertainment is -$0.31, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +25.2%.
RL and AMC'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 >>