earnings have all but passed and investors are already looking forward to the
next round of results which begins in October.
of rest may not be that relaxing as September is the worst performing month in
history with an average return of -0.79% compared to +1.12% for the rest of the months in the year. Q3
results should also begin to include more revisions to the coming full year's
expectations, which have remained relatively unscathed for those who have been
aggressive enough to project that far out.
For the second quarter, year over year revenue growth remained non-existent and poses a real challenge
for those who are buying into the S&P 500 at these levels. Economic
data remains flat to bearish and China's growth is continuing to slow. It seems
that the potential for QE from several major central banks is enough to hold
things up for now. But we must remember
that it all comes back to earnings and if corporate America can't continue to
deliver, sellers' justice may be swift.
proprietary methodology for determining which stocks have the best chance to
surprise with their next earnings announcement. The Earnings ESP shows the
percentage difference between the Most Accurate Estimate and the Consensus.
predict earnings surprises to the upside and downside; the greater the ESP
(positive or negative) the greater the likelihood for a surprise.
quantify the conviction of the analysts for a surprise and stack the odds in my
favor when I combine it with other measurements and statistics.
bullish potential surprises (positive ESP) as well as bearish surprises
Bullish ESP Stocks
Dollar General (DG) is a Zacks Rank 2 stock with a positive
earnings ESP of 2% for the current quarter; the Zacks Consensus is for a profit
of 64 cents, with the most accurate estimate being for 65 cents.
it may not be the strongest ESP, Dollar General may be the choice for consumers
who are under stress. Consumer confidence, which is at its lowest level since
November of 2011 tells me that thrifty shopping is still in vogue. Walmart
also noticed that spending patterns are showing a cash strapped consumer
looking for deals, which could be a benefit for Dollar General.
the contrarians out there, Dollar General is off almost 12% from its July highs
which may present a value proposition. Analyst
momentum has been positive over the last 90 days and DG is currently trading at
17 times forward earnings.
Dollar General reports earnings on September 5th
Conns Inc. (CONN) is a Zacks Rank 2 stock with a positive
earnings ESP of 2.6% for the current quarter. The Zacks consensus
estimate is for Q2 EPS of $0.35, with the most accurate estimate at $0,36.
most likely reason for the lower ESP here is due to the fact that Conn's
pre-released some very favorable sales data just a couple weeks ago. Q2
revenue at stores open at least a year rose 22%, boosted by a jump in demand
for furniture and mattresses. Total
sales of furniture and mattresses increased 50 percent to $31.9 million, while
total home office sales grew 35 percent to $14.4 million.
plays into the housing strength that we have been seeing and is a welcome
statistic in a mostly gray environment. Conn's
offers discounted goods and operates their own consumer credit facility, making
it easy for buyer with less than perfect credit to get appliances and
with the recent rally, there may still be more upside in Conn's; analyst
momentum is still strong going into the report.
Conn's reports earnings on September 5th
Pharmacyclics, Inc. (PCYC) is also a Zacks Rank 2
stock with a positive earnings ESP of 16% for the current quarter; the Zacks
Consensus is for a loss of 25 cents, with the most accurate consensus looking
for a loss of only 21 cents.
is no doubt that a company not making money poses a bit more risk and the fact
that the name is uncommon and hard to pronounce doesn't make things any easier. Healthcare
is a widely debated issue, but I think we can all agree that companies who help
terminally ill patients live longer more fuller lives will continue to prosper,
no matter what happens to the curent state of care in the U.S.
am not going to pretend I know the specifics of Pharmacyclics reaserch, but
based off analyst action and momentum, there is a positive bias into this next
earnings on September 10th
Take Earnings a Step Further
If the ESP method sounds intriguing to you for improving your portfolio
performance, you should check out Zacks Whisper Trader.
only do I utilize Earnings ESP but I also factor in several critical data sets
to create the secret sauce I use to achieve almost 80% accuracy in
identifying positive earnings surprises & before they're reported.
Senior Equities Strategist, Jared Levy, is the editor of Whisper Trader and can show you how to use the power of Zacks
Earnings ESP and earnings surprises for timely, steady gains.
more about Whisper Trader now