Wall Street watches a company’s quarterly report closely to understand as much as possible about its recent performance and what to expect going forward. Of course, one figure often stands out among the rest: earnings.
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.
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.
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.
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 Ulta Beauty?
The last thing we will do today, now that we have a grasp on the ESP and how powerful of a tool it can be, is to quickly look at a qualifying stock. Ulta Beauty (ULTA – Free Report) holds a #2 (Buy) at the moment and its Most Accurate Estimate comes in at $7.16 a share 30 days away from its upcoming earnings release on March 13, 2025.
By taking the percentage difference between the $7.16 Most Accurate Estimate and the $7.09 Zacks Consensus Estimate, Ulta Beauty has an Earnings ESP of +0.92%. Investors should also know that ULTA 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.
ULTA 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 Walgreens Boots Alliance (WBA – Free Report) as well.
Walgreens Boots Alliance, which is readying to report earnings on March 27, 2025, sits at a Zacks Rank #3 (Hold) right now. It’s Most Accurate Estimate is currently $0.53 a share, and WBA is 44 days out from its next earnings report.
Walgreens Boots Alliance’s Earnings ESP figure currently stands at +0.54% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $0.53.
ULTA and WBA’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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