Looking for Stocks with Positive Earnings Momentum? Check Out These 2 Consumer Discretionary Names

Zacks highlights its Earnings ESP metric — the percentage difference between the Most Accurate Estimate and the Zacks Consensus — as a tool to identify likely earnings surprises; combining a Zacks Rank of #3 or better with a positive ESP historically produced positive surprises 70% of the time and a 10-year backtest annualized return of 28.3%. Two near-term examples include Stride, Inc. (LRN) with a Most Accurate Estimate of $2.42 vs. a $2.33 consensus (ESP +3.72%) ahead of a Jan. 27, 2026 release, and Sirius XM (SIRI) with a $0.78 most accurate vs. $0.77 consensus (ESP +1.45%) ahead of a Jan. 29, 2026 release. The piece promotes using the Zacks Earnings ESP filter to identify consumer-discretionary and media names that may beat consensus and drive actionable trading ideas ahead of reports.

Analysis

Market Structure: Positive Earnings ESPs (LRN +3.72%, SIRI +1.45%) preferentially benefit stock-specific, short-horizon traders, options buyers of directionality, and quant screens exploiting analyst revisions. Short sellers, volatility sellers, and index funds may be hurt if idiosyncratic gaps occur; expect temporary supply squeeze into earnings and modest IV repricing around Jan 27–29. Cross-asset effects are limited — small impact on credit/FX; expect options IV to rise 20–60% into reports and compress sharply after results.

Risk Assessment: Tail risks include sharply missed guidance (regulatory scrutiny for LRN’s education subsidies or ad/auto ad slowdown hitting SIRI) and an unexpected large acquisition that resets multiples. Immediate (days): elevated event volatility and potential 10–25% intraday moves; short-term (weeks): post-earnings drift driven by guidance revision; long-term (quarters): fundamentals and subscriber trends matter. Hidden dependencies: Most Accurate Estimate may be based on a single analyst — so the signal is thin and reversal risk is real.

Trade Implications: For LRN, the +3.72% ESP is a small edge — prefer limited-loss option structures: 30–45 day ATM call spreads (buy ATM, sell +10–15% OTM) sized 1–3% portfolio risk, enter 7–14 days pre-earnings and close on day+1 post-report. For SIRI, where ESP is marginal, favor asymmetric premium sells after earnings IV crush or a small (1–2%) directional long (buy 14–30d call spread) rather than long straddles; consider long LRN vs short XLY pair (beta-neutral) to isolate stock-specific surprise.

Contrarian Angles: The consensus underweights the thinness of the Most Accurate Estimate sample; small positive ESPs often produce modest drift, not large gaps. If IV is already elevated >30% vs 30-day realized vol, long volatility is poor value — instead, plan to be a volatility seller after an expected positive print. Re-rate positions only if ESP rises above +5% (scale up) or falls to negative (scale down/exit).

Key Decisions for Investors

• Establish a 1–3% portfolio-sized directional position in LRN using a 30–45 day call spread (buy ATM, sell +10–15% OTM) entered 7–14 days before earnings (target entry by Jan 20–23); hard stop-loss at 12% of notional and close on day+1 after Jan 27 or at 30–50% profit.
• For SIRI, avoid long straddles; instead deploy a 1–2% position via a 14–30 day call spread ahead of Jan 29 if conviction exists, or plan to SELL OTM premium (puts or iron condor) after the earnings IV crush — only after IV falls >20% from pre-earnings peak.
• Implement a pair trade: long LRN and short XLY sized to neutralize beta (~60–80% hedge) for 2–6 weeks to capture company-specific earnings drift; unwind within 3 trading days post-earnings or if LRN’s ESP moves >+5% before entry.
• Risk triggers: reduce/exit positions immediately if (a) IV run-up >30% vs 30-day avg, (b) short interest >15%, or (c) Most Accurate Estimate reverses by >5% in the 5 days before reporting; scale up only if ESP >+5% or management signals sustainable guidance uplift.