These 2 Retail and Wholesale Stocks Could Beat Earnings: Why They Should Be on Your Radar

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.

We know earnings results are vital, but how a company performs compared to bottom line expectations can be even more important when it comes to stock prices, especially in the near-term. This means that investors might want to take advantage of these earnings surprises.

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 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.

Now that we understand the basic idea, let's look at how the Expected Surprise Prediction works. 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.

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 Abercrombie & Fitch?

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. Abercrombie & Fitch (ANF) earns a #2 (Buy) right now and its Most Accurate Estimate sits at $1.59 a share, just 22 days from its upcoming earnings release on May 29, 2024.

ANF has an Earnings ESP figure of +3.7%, which, as explained above, is calculated by taking the percentage difference between the $1.59 Most Accurate Estimate and the Zacks Consensus Estimate of $1.53. Abercrombie & Fitch 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.

ANF is part of a big group of Retail and Wholesale stocks that boast a positive ESP, and investors may want to take a look at Domino's Pizza (DPZ) as well.

Slated to report earnings on July 22, 2024, Domino's Pizza holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is $3.67 a share 76 days from its next quarterly update.

For Domino's Pizza, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $3.66 is +0.38%.

ANF and DPZ'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 >>

Where Will Stocks Go…

If Biden Wins? If Trump Wins?

The answers may surprise you.

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Now is the time to download Zacks' free Special Report with 5 stocks that offer extreme upside for both Democrats and Republicans…

1. Medical manufacturer has gained +11,000% in the last 15 years.

2. Rental company is absolutely crushing its sector.

3. Energy powerhouse plans to grow its already large dividend by 25%.

4. Aerospace and defense standout just landed a potentially $80 billion contract.

5. Giant Chipmaker is building huge plants in the U.S. 

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Abercrombie & Fitch Company (ANF) : Free Stock Analysis Report

Domino's Pizza Inc (DPZ) : Free Stock Analysis Report

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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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