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.
The earnings figure itself is key, but a beat or miss on the bottom line can sometimes be just as, if not more, important. Therefore, investors should consider paying close attention to these earnings surprises, as a big beat can help a stock climb even higher.
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. 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 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 look at a qualifying stock. Ulta Beauty (ULTA) holds a Zacks Rank #2 at the moment and its Most Accurate Estimate comes in at $7.17 a share 14 days away from its upcoming earnings release on March 13, 2025.
By taking the percentage difference between the $7.17 Most Accurate Estimate and the $7.06 Zacks Consensus Estimate, Ulta Beauty has an Earnings ESP of 1.62%.
ULTA is just one of a large group of Retail-Wholesale stocks with a positive ESP figure. Brinker International (EAT) is another qualifying stock you may want to consider.
Brinker International, which is readying to report earnings on April 29, 2025, sits at a Zacks Rank #1 (Strong Buy) right now. It's Most Accurate Estimate is currently $2.43 a share, and EAT is 61 days out from its next earnings report.
Brinker International's Earnings ESP figure currently stands at 2.59% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $2.37.
Because both stocks hold a positive Earnings ESP, ULTA and EAT could potentially post earnings beats in their next reports.
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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Ulta Beauty Inc. (ULTA) : Free Stock Analysis Report
Brinker International, Inc. (EAT) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
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