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.
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.
2 Stocks to Add to Your Watchlist
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 final step today is to look at a stock that meets our ESP qualifications. Dollar Tree (DLTR) earns a Zacks Rank #2 eight days from its next quarterly earnings release on August 25, 2022, and its Most Accurate Estimate comes in at $1.60 a share.
By taking the percentage difference between the $1.60 Most Accurate Estimate and the $1.57 Zacks Consensus Estimate, Dollar Tree has an Earnings ESP of 1.75%.
DLTR is part of a big group of Retail-Wholesale stocks that boast a positive ESP, and investors may want to take a look at MercadoLibre (MELI) as well.
MercadoLibre is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on November 3, 2022. MELI's Most Accurate Estimate sits at $2.39 a share 78 days from its next earnings release.
The Zacks Consensus Estimate for MercadoLibre is $2.33, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of 2.47%.
Because both stocks hold a positive Earnings ESP, DLTR and MELI could potentially post earnings beats in their next reports.
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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Dollar Tree, Inc. (DLTR) : Free Stock Analysis Report
MercadoLibre, Inc. (MELI) : Free Stock Analysis Report
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