These 2 Retail and Wholesale Stocks Could Beat Earnings: Why They Should Be on Your Radar

Zacks' Earnings ESP tool, which leverages the most current analyst revisions against consensus estimates, has demonstrated a 70% success rate in predicting positive earnings surprises for stocks with a Zacks Rank #3 or better, historically generating 28.3% average annual returns. This methodology indicates that retail and wholesale stocks Ulta Beauty (ULTA) and TJX (TJX), both currently holding a Zacks Rank #3 with positive ESPs of +1.39% and +1.16% respectively, are strongly positioned to exceed their upcoming earnings expectations.

Analysis

The analysis centers on the Zacks Expected Surprise Prediction (ESP) model, a quantitative tool designed to identify companies likely to exceed earnings estimates. The model's methodology, which compares the most recent analyst estimates to the consensus, has demonstrated a 70% success rate in predicting positive surprises for stocks with a Zacks Rank of #3 (Hold) or better, delivering a 28.3% average annual return in a ten-year backtest. Two retail sector companies, Ulta Beauty (ULTA) and TJX Companies (TJX), currently meet these criteria. Ulta Beauty, with a Zacks Rank #3 (Hold), shows a positive Earnings ESP of +1.39%, based on a Most Accurate Estimate of $5.04 versus a consensus of $4.97, with its earnings report just seven days away. Similarly, TJX holds a Zacks Rank #3 (Hold) and exhibits a positive ESP of +1.16%, derived from a Most Accurate Estimate of $1.22 against a $1.21 consensus, though its report is 90 days out. These signals suggest a statistically significant probability that both companies will report earnings above current market expectations.

Key Decisions for Investors

• Investors could consider tactical long positions in Ulta Beauty and TJX to capitalize on the potential for a positive earnings surprise, as suggested by their respective positive ESP figures of +1.39% and +1.16%.
• The imminent nature of Ulta's earnings report in seven days makes it a more immediate catalyst to monitor, whereas the signal for TJX is longer-dated with its report 90 days away, allowing more time for estimates to evolve.
• While the positive ESP is a bullish indicator for an earnings beat, the accompanying Zacks Rank of #3 (Hold) on both stocks implies expectations for in-line market performance, suggesting that any position should be balanced against this neutral broader outlook.