Why Investors Need to Take Advantage of These 2 Retail and Wholesale Stocks Now

Zacks Investment Research highlights its Earnings ESP (Expected Surprise Prediction) tool as a method for identifying stocks likely to exceed quarterly earnings expectations. This proprietary metric, calculated by comparing the Most Accurate Estimate to the Zacks Consensus Estimate, has historically shown that stocks with a positive ESP and a Zacks Rank of #3 (Hold) or better deliver positive earnings surprises 70% of the time and average 28.3% annual returns over a decade. The article specifically points to Carvana (CVNA), with a +5.48% ESP and a #2 (Buy) rank, and Boot Barn (BOOT), with a +0.65% ESP and a #3 (Hold) rank, as retail and wholesale stocks poised for potential earnings beats in their upcoming reports.

Analysis

The analysis centers on the Zacks Earnings Expected Surprise Prediction (ESP) model, a quantitative tool designed to identify companies likely to surpass earnings expectations. The model's efficacy is supported by a 10-year backtest indicating that stocks with a positive ESP and a Zacks Rank of #3 (Hold) or better have historically delivered positive earnings surprises 70% of the time, yielding average annual returns of 28.3%. The report highlights two specific retail sector stocks that currently meet these criteria. Carvana (CVNA) presents a strong signal, holding a #2 (Buy) rank with a significant Earnings ESP of +5.48%, based on a Most Accurate Estimate of $1.16 per share versus a consensus of $1.10. Boot Barn (BOOT) is also flagged, though with a less pronounced signal, carrying a #3 (Hold) rank and a marginal ESP of +0.65% from a Most Accurate Estimate of $1.54 versus a consensus of $1.53. Both companies are positioned as having a high probability of delivering a positive earnings surprise in their upcoming quarterly reports.

Key Decisions for Investors

• Investors interested in an earnings-driven catalyst strategy should consider the two highlighted stocks, CVNA and BOOT, which are flagged by a quantitative model with a historically high success rate for predicting positive surprises.
• Given its stronger #2 (Buy) rating and more significant +5.48% ESP, Carvana (CVNA) may warrant consideration for a tactical long position ahead of its July 30 earnings release for those seeking to capitalize on a potential beat.
• For Boot Barn (BOOT), the signal is weaker with a #3 (Hold) rank and a +0.65% ESP, suggesting a more cautious approach; it could be placed on a watchlist to monitor for a potential surprise without committing capital immediately.
• Recognize that positioning ahead of earnings carries significant event risk, and while the backtested data is compelling, it does not guarantee future performance; therefore, any positions should be sized to account for potential volatility.