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.
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.
2 Stocks to Add to Your Watchlist
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 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.
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 look at a qualifying stock. BJ's Wholesale Club (BJ) holds a Zacks Rank #2 at the moment and its Most Accurate Estimate comes in at $0.86 a share 11 days away from its upcoming earnings release on May 23, 2023.
By taking the percentage difference between the $0.86 Most Accurate Estimate and the $0.84 Zacks Consensus Estimate, BJ's Wholesale Club has an Earnings ESP of 2.5%.
BJ is part of a big group of Consumer Discretionary stocks that boast a positive ESP, and investors may want to take a look at Royal Caribbean (RCL) as well.
Royal Caribbean is a Zacks Rank #2 (Buy) stock, and is getting ready to report earnings on July 27, 2023. RCL's Most Accurate Estimate sits at $1.57 a share 76 days from its next earnings release.
Royal Caribbean's Earnings ESP figure currently stands at 15.31% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $1.37.
Because both stocks hold a positive Earnings ESP, BJ and RCL 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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