How to Find Strong Consumer Discretionary Stocks Slated for Positive Earnings Surprises

Zacks Investment Research highlights the importance of earnings surprises and introduces the Zacks Earnings ESP filter, which identifies stocks with a high probability of beating earnings estimates by comparing the most recent analyst estimates against the consensus. The article points to Carnival (CCL), with an Earnings ESP of +8.42% and a Zacks Rank #3 (Hold), and Warner Bros. Discovery (WBD), with an Earnings ESP of +4.41% and a Zacks Rank #3 (Hold), as examples of stocks with positive ESPs that may signal upcoming earnings surprises.

Analysis

The Zacks Earnings ESP (Expected Surprise Prediction) system is presented as a tool for identifying companies likely to surpass earnings expectations by focusing on the most up-to-date analyst earnings revisions. This methodology calculates the percentage difference between the 'Most Accurate Estimate'—the most recent analyst projection—and the broader 'Zacks Consensus Estimate'. According to Zacks Investment Research's 10-year backtesting, combining a positive ESP with a Zacks Rank of #3 (Hold) or stronger has historically led to a positive bottom-line surprise 70% of the time and produced average annual returns of approximately 28%. Carnival Corporation (CCL), currently holding a Zacks Rank #3 (Hold), demonstrates a positive Earnings ESP of +8.42%, with its Most Accurate Estimate at $0.25 per share versus a Zacks Consensus Estimate of $0.23, ahead of its earnings release scheduled for June 24, 2025. Similarly, Warner Bros. Discovery (WBD), also rated Zacks Rank #3 (Hold), has a positive ESP of +4.41%, derived from its Most Accurate Estimate of -$0.16 per share compared to the Zacks Consensus Estimate of -$0.17, with its earnings due on August 6, 2025. The positive ESP figures for both CCL and WBD suggest an increased likelihood that these companies may report earnings above current consensus forecasts.

Key Decisions for Investors

• Investors could consider the Zacks Earnings ESP as a quantitative overlay to identify stocks with a historically demonstrated higher probability of delivering positive earnings surprises, especially when combined with a Zacks Rank of #3 (Hold) or better.
• Carnival (CCL) and Warner Bros. Discovery (WBD) warrant attention ahead of their respective earnings reports on June 24, 2025, and August 6, 2025, as their positive ESPs of +8.42% and +4.41% respectively, suggest potential for exceeding consensus earnings estimates.
• Utilize the Zacks Earnings ESP Filter to systematically screen for other equities, beyond CCL and WBD, that exhibit strong positive or negative ESPs to inform trading decisions around earnings announcements.