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.
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 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. The ESP is calculated by comparing the Most Accurate Estimate to the Zacks Consensus Estimate, with the percentage difference between the two giving us the Zacks 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. MercadoLibre (MELI) holds a Zacks Rank #2 at the moment and its Most Accurate Estimate comes in at $8.19 a share 17 days away from its upcoming earnings release on May 1, 2025.
By taking the percentage difference between the $8.19 Most Accurate Estimate and the $7.52 Zacks Consensus Estimate, MercadoLibre has an Earnings ESP of 8.86%.
MELI is one of just a large database of Retail-Wholesale stocks with positive ESPs. Another solid-looking stock is Kohl's (KSS).
Kohl's is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on May 29, 2025. KSS' Most Accurate Estimate sits at -$0.53 a share 45 days from its next earnings release.
The Zacks Consensus Estimate for Kohl's is -$0.53, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of 0.9%.
MELI and KSS' positive ESP metrics may signal that a positive earnings surprise for both stocks is on the horizon.
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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MercadoLibre, Inc. (MELI) : Free Stock Analysis Report
Kohl's Corporation (KSS) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
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