Two factors often determine stock prices in the long run: earnings and interest rates. Investors can't control the latter, but they can focus on a company's earnings results every quarter.
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.
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. Ulta Beauty (ULTA) earns a Zacks Rank #3 right now and its Most Accurate Estimate sits at $4.09 a share, just 10 days from its upcoming earnings release on December 1, 2022.
ULTA has an Earnings ESP figure of 0.32%, which, as explained above, is calculated by taking the percentage difference between the $4.09 Most Accurate Estimate and the Zacks Consensus Estimate of $4.08.
ULTA is part of a big group of Retail-Wholesale stocks that boast a positive ESP, and investors may want to take a look at AutoZone (AZO) as well.
AutoZone is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on December 6, 2022. AZO's Most Accurate Estimate sits at $25.54 a share 15 days from its next earnings release.
For AutoZone, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $24.82 is 2.91%.
Because both stocks hold a positive Earnings ESP, ULTA and AZO 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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Ulta Beauty Inc. (ULTA) : Free Stock Analysis Report
AutoZone, Inc. (AZO) : Free Stock Analysis Report
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