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.

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.

The ability to identify stocks that are likely to top quarterly earnings expectations can be profitable, but it's no simple task. Here at Zacks, our Earnings ESP filter helps make things easier.

The Zacks Earnings ESP, Explained

The Zacks Earnings ESP, or Expected Surprise Prediction, aims to find earnings surprises by focusing on the most recent analyst revisions. The basic premise is that if an analyst reevaluates their earnings estimate ahead of an earnings release, it means they likely have new information that could possibly be more accurate.

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. The system also utilizes our core Zacks Rank to provide a stronger system for identifying stocks that might beat their next quarterly earnings estimate and possibly see the stock price climb.

In fact, when we combined a Zacks Rank #3 (Hold) or better and a positive Earnings ESP, stocks produced a positive surprise 70% of the time. Perhaps most importantly, using these parameters has helped produce 28.3% annual returns on average, according to our 10 year backtest.

Stocks with a #3 (Hold) ranking, which is most stocks covered at 60%, are expected to perform in-line with the broader market. But stocks that fall into the #2 (Buy) and #1 (Strong Buy) ranking, 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 Macy's?

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. Macy's (M) earns a #3 (Hold) right now and its Most Accurate Estimate sits at $0.26 a share, just 13 days from its upcoming earnings release on May 21, 2024.

By taking the percentage difference between the $0.26 Most Accurate Estimate and the $0.18 Zacks Consensus Estimate, Macy's has an Earnings ESP of +48.57%. Investors should also know that M is one of a large group 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.

M is just one of a large group of Retail and Wholesale stocks with a positive ESP figure. TJX (TJX) is another qualifying stock you may want to consider.

Slated to report earnings on May 15, 2024, TJX holds a #2 (Buy) ranking on the Zacks Rank, and it's Most Accurate Estimate is $0.89 a share seven days from its next quarterly update.

TJX's Earnings ESP figure currently stands at +2.5% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $0.87.

M and TJX'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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Macy's, Inc. (M) : Free Stock Analysis Report

The TJX Companies, Inc. (TJX) : 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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