How to Boost Your Portfolio with Top Consumer Discretionary Stocks Set to Beat Earnings

Zacks explains its Earnings ESP model, which compares the most recent analyst “Most Accurate Estimate” with the Zacks consensus and incorporates the Zacks Rank to flag likely earnings surprises; historically a positive ESP with a Zacks Rank of #3 (Hold) or better produced a positive bottom-line surprise 70% of the time and, in a 10-year backtest, roughly 28% annualized returns. The firm highlights Under Armour (UAA) — Zacks Rank #3, most accurate estimate -$0.07 vs. consensus -$0.08, ESP +15.74% ahead of its August 13, 2024 report — and MGM Resorts (MGM) — Rank #3, most accurate estimate $0.77 vs. consensus $0.66, ESP +15.35% ahead of July 31, 2024 — as examples of stocks with elevated odds of beating estimates. These positive ESP readings signal potential short-term upside into earnings and provide a data-driven filter for earnings-driven trading, though investors should weigh model limitations and other company- or macro-level catalysts.

Analysis

Zacks' Earnings ESP model compares the Most Accurate Estimate to the Zacks Consensus and incorporates the Zacks Rank to quantify the percentage Expected Surprise Prediction; the model prioritizes analyst estimates issued closest to the report date on the premise they incorporate the most up-to-date information. Historical backtest cited in the article shows that a positive ESP combined with a Zacks Rank of #3 (Hold) or better produced a positive bottom-line surprise 70% of the time and delivered roughly 28% annualized returns over a 10-year period, supporting the model's utility for earnings-driven trading. Under Armour (UAA) and MGM Resorts (MGM) are highlighted as near-term examples: UAA (Rank #3) has a Most Accurate Estimate of -$0.07 versus a consensus of -$0.08 for an ESP of +15.74% ahead of its August 13, 2024 report, while MGM (Rank #3) shows a Most Accurate Estimate of $0.77 versus a $0.66 consensus for an ESP of +15.35% ahead of its July 31, 2024 release. These positive ESP readings indicate elevated odds of a beat and potential short-term upside into each company’s earnings print, but the metric is probabilistic and should be weighed alongside company guidance and other catalysts before trading.

Key Decisions for Investors

• Consider tactical, size-limited long exposure to UAA and MGM into their upcoming reports given ESPs of +15.74% and +15.35% and Zacks Rank #3, but limit time in trade to the earnings event and predefine exit rules
• Use the Zacks Earnings ESP filter to prioritize names with positive Most Accurate Estimate divergences from consensus, while cross-checking recent company guidance, sector drivers, and macro risks before initiating positions
• If holding through the print, employ downside protection (stop-losses or hedges) because the cited 70% historical beat rate is probabilistic and earnings surprises or guidance changes can produce rapid reversals