How the Zacks Earnings ESP Could Indicate Retail and Wholesale Stocks Set to Surpass Earnings Expectations

When it comes to the stock market, quarterly earnings reports are watched closely by Wall Street to gauge a company's performance and predict its future. A standout metric in these reports is the earnings figure, as exceeding expectations can significantly boost a company's stock value, while failing to meet them can lead to a dip in price.

Investors who can pinpoint which stocks are likely to surpass earnings estimates often see stronger returns. One tool that aims to simplify this process is known as the Zacks Earnings ESP (Expected Surprise Prediction).

Understanding the Zacks Earnings ESP

The Zacks Earnings ESP is a method that focuses on the most recent analyst earnings revisions, with the idea that closer to the report date, analysts have the most current information, thus providing more accurate estimates. The ESP itself is calculated by taking the percentage difference between the 'Most Accurate Estimate' provided by analysts and the 'Zacks Consensus Estimate', with the Zacks Rank factored into the equation to improve its predictive power.

Historical data shows that when a positive Zacks Earnings ESP is combined with a Zacks Rank of #3 (Hold) or better, there is a significantly higher chance of a stock reporting an earnings surprise. Indeed, stocks with this combination have reported positive surprises 70% of the time, potentially leading to impressive annual returns.

Let's examine two stocks within the retail and wholesale sector that showcase positive Zacks Earnings ESP values and are worth watching as their earnings dates approach: TJX Companies Inc. (TJX) and Wingstop Inc. (WING).

Highlighting Two Stocks with Positive Earning ESPs

TJX currently holds a Zacks Rank of #3 (Hold) with an Earnings ESP of +1.52%, indicating it could beat consensus estimates in its upcoming report. Wingstop, with a Zacks Rank of #2 (Buy), shows a slightly lower Earnings ESP of +1.28%, which still suggests a potential earnings beat ahead of its report.

Both TJX and Wingstop are part of a larger group of retail and wholesale stocks that exhibit positive ESPs, making them prime candidates for investors aiming to profit from the next earnings season.

Zacks, Earnings, ESP