Earnings are arguably the most important single number on a company's quarterly financial report. Wall Street clearly dives into all of the other metrics and management's input, but the EPS figure helps cut through all the noise.
The earnings figure itself is key, 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 even higher.
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. AutoZone (AZO) earns a Zacks Rank #3 right now and its Most Accurate Estimate sits at $25.54 a share, just 13 days from its upcoming earnings release on December 6, 2022.
By taking the percentage difference between the $25.54 Most Accurate Estimate and the $24.82 Zacks Consensus Estimate, AutoZone has an Earnings ESP of 2.91%.
AZO is just one of a large group of Retail-Wholesale stocks with a positive ESP figure. Walmart (WMT) is another qualifying stock you may want to consider.
Walmart, which is readying to report earnings on February 16, 2023, sits at a Zacks Rank #2 (Buy) right now. It's Most Accurate Estimate is currently $1.51 a share, and WMT is 85 days out from its next earnings report.
Walmart's Earnings ESP figure currently stands at 0.13% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $1.50.
AZO and WMT'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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