Investing
Looking for Stocks With Positive Earnings Momentum? Check Out These 2 Consumer Staples Names
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Quarterly financial reports play a vital role on Wall Street, as they help investors see how a company has performed and what might be coming down the road in the near-term. And out of all of the metrics and results to consider, earnings is one of the most important.
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 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.
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 #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 Lamb Weston?
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. Lamb Weston (LW) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at $1.11 a share 15 days away from its upcoming earnings release on October 5, 2023.
LW has an Earnings ESP figure of +1.94%, which, as explained above, is calculated by taking the percentage difference between the $1.11 Most Accurate Estimate and the Zacks Consensus Estimate of $1.08. Lamb Weston 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.
LW is part of a big group of Consumer Staples stocks that boast a positive ESP, and investors may want to take a look at Dutch Bros (BROS) as well.
Slated to report earnings on November 8, 2023, Dutch Bros holds a #3 (Hold) ranking on the Zacks Rank, and it’s Most Accurate Estimate is $0.09 a share 49 days from its next quarterly update.
Dutch Bros’ Earnings ESP figure currently stands at +28.57% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $0.07.
Because both stocks hold a positive Earnings ESP, LW and BROS could potentially post earnings beats in their next reports.
Lamb Weston (LW): Free Stock Analysis Report
Dutch Bros Inc. (BROS): Free Stock Analysis Report
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