These 2 Consumer Staples Stocks Could Beat Earnings: Why They Should Be on Your Radar

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, of course, 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 and vice versa.

Hunting for 'earnings whispers' or companies poised to beat their quarterly earnings estimates is a somewhat common practice. But that doesn't make it easy. One way that has been proven to work is by using the Zacks Earnings ESP tool.

The Zacks Earnings ESP, Explained

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 core of the ESP model is comparing the Most Accurate Estimate to the Zacks Consensus Estimate, where the resulting percentage difference between the two equals the Expected Surprise Prediction. The Zacks Rank is also factored into the ESP metric to better help find companies that appear poised to top their next bottom-line consensus estimate, which will hopefully help lift the stock price.

When we join a positive earnings ESP with a Zacks Rank #3 (Hold) or stronger, stocks posted a positive bottom-line surprise 70% of the time. Plus, this system saw investors produce roughly 28% annual returns on average, according to our 10 year backtest.

Stocks with a ranking of #3 (Hold), or 60% of all stocks covered by the Zacks Rank, are expected to perform in-line with the broader market. Stocks with rankings of #2 (Buy) and #1 (Strong Buy), or the top 15% and top 5% of stocks, respectively, should outperform the market; Strong Buy stocks should outperform more than any other rank.

Should You Consider Constellation Brands?

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. Constellation Brands (STZ) earns a #3 (Hold) right now and its Most Accurate Estimate sits at $2.13 a share, just seven days from its upcoming earnings release on April 11, 2024.

STZ has an Earnings ESP figure of +1.22%, which, as explained above, is calculated by taking the percentage difference between the $2.13 Most Accurate Estimate and the Zacks Consensus Estimate of $2.11. Constellation Brands is one of a large database of stocks with positive ESPs. Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they've reported.

STZ is one of just a large database of Consumer Staples stocks with positive ESPs. Another solid-looking stock is Chewy (CHWY).

Chewy, which is readying to report earnings on May 29, 2024, sits at a Zacks Rank #3 (Hold) right now. It's Most Accurate Estimate is currently $0.22 a share, and CHWY is 55 days out from its next earnings report.

For Chewy, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $0.21 is +0.8%.

STZ and CHWY's positive ESP metrics may signal that a positive earnings surprise for both stocks is on the horizon.

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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Constellation Brands Inc (STZ) : Free Stock Analysis Report

Chewy (CHWY) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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