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.
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 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. With this in mind, the Expected Surprise Prediction compares the Most Accurate Estimate (being the most recent) against the overall Zacks Consensus Estimate. The percentage difference provides the ESP figure.
Now that we understand what the ESP is and how beneficial it can be, let's dive into a stock that currently fits the bill. Marriott International (MAR) earns a Zacks Rank #3 right now and its Most Accurate Estimate sits at $2.12 a share, just 30 days from its upcoming earnings release on November 2, 2023.
By taking the percentage difference between the $2.12 Most Accurate Estimate and the $2.09 Zacks Consensus Estimate, Marriott International has an Earnings ESP of 1.59%.
MAR is one of just a large database of Consumer Discretionary stocks with positive ESPs. Another solid-looking stock is BJ's Wholesale Club (BJ).
Slated to report earnings on November 16, 2023, BJ's Wholesale Club holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is $0.96 a share 44 days from its next quarterly update.
The Zacks Consensus Estimate for BJ's Wholesale Club is $0.96, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of 0.48%.
Because both stocks hold a positive Earnings ESP, MAR and BJ 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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