How to Boost Your Portfolio with Top Retail and Wholesale Stocks Set to Beat Earnings

Zacks Investment Research highlights the importance of earnings surprises and introduces its Earnings ESP (Expected Surprise Prediction) filter, which identifies stocks with the highest probability of positive earnings surprises. The ESP is calculated by comparing the most recent analyst estimate to the consensus, and a positive ESP combined with a Zacks Rank #3 (Hold) or better has historically resulted in positive earnings surprises 70% of the time, yielding average annual returns of 28.3% based on a 10-year backtest. Signet (SIG) and TJX (TJX) are cited as examples with positive ESPs, potentially signaling upcoming positive earnings surprises.

Analysis

The article highlights the Zacks Earnings ESP (Expected Surprise Prediction) as a tool for identifying potential earnings surprises, which, alongside earnings themselves, are presented as key long-term drivers of stock prices. The ESP methodology compares the Most Accurate Estimate from analysts revising closer to an earnings release with the Zacks Consensus Estimate; a positive ESP indicates a higher likelihood of an earnings beat. Notably, a strategy combining a positive ESP with a Zacks Rank #3 (Hold) or better has historically resulted in positive earnings surprises 70% of the time and yielded average annual returns of 28.3% in a 10-year backtest. Signet Jewelers (SIG) is presented as a current example, with a Zacks Rank #3 (Hold) and an Earnings ESP of +2.94%, derived from its Most Accurate Estimate of $1.05 versus a Zacks Consensus Estimate of $1.02, ahead of its June 3, 2025, earnings release. Similarly, TJX Companies (TJX), also a Zacks Rank #3 (Hold), shows a positive ESP of +0.33% (Most Accurate Estimate $1.02 versus Consensus $1.01) for its earnings report due August 20, 2025. The positive sentiment score of 0.75 for the article reflects the optimistic presentation of this tool and its potential benefits for investors seeking to capitalize on earnings events. The Zacks Rank system itself is reported to have significantly outperformed the S&P 500, with an average gain of +24.08% per year from 1988 through May 6, 2024, lending credibility to its quantitative models.

Key Decisions for Investors

• Investors may consider utilizing the Zacks Earnings ESP filter to identify stocks, such as Signet (SIG) and TJX (TJX), that exhibit a higher statistical probability of delivering a positive earnings surprise, particularly when combined with a Zacks Rank #3 (Hold) or better.
• Given SIG's +2.94% ESP and TJX's +0.33% ESP ahead of their respective Q2 2025 earnings, positions in these retail stocks could be monitored for short-term trading opportunities around their earnings announcements, though their #3 (Hold) rank suggests expectations of in-line market performance.
• While the historical 70% success rate and 28.3% average annual return of the ESP strategy are compelling, these should be weighted against current market conditions and individual company fundamentals, incorporating the ESP as one component of a broader investment due diligence process.