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

Zacks highlights its proprietary Earnings ESP (Expected Surprise Prediction) tool, which forecasts earnings beats by comparing the most recent analyst estimate against the consensus. When combined with a Zacks Rank #3 (Hold) or better and a positive ESP, this methodology has historically predicted positive earnings surprises 70% of the time, yielding an average annual return of 28.3% over a 10-year backtest. McDonald's (MCD) and Kroger (KR) are presented as current examples, both holding a Zacks Rank #3 and positive ESPs, indicating a strong likelihood of exceeding analyst expectations in their upcoming quarterly 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 estimates. The model's core premise is that the most recent analyst revisions, captured in the "Most Accurate Estimate," provide a more current and potentially more accurate view than the broader consensus. According to the provided 10-year backtest, a strategy combining a positive Earnings ESP with a Zacks Rank of #3 (Hold) or better has historically predicted a positive earnings surprise 70% of the time, generating an average annual return of 28.3%. Two retail and wholesale stocks are highlighted as currently meeting these criteria: McDonald's (MCD) and Kroger (KR). McDonald's, with a Zacks Rank of #3, exhibits a positive ESP of +0.43% based on a Most Accurate Estimate of $3.16 versus a consensus of $3.15 ahead of its August 6, 2025 report. Similarly, Kroger, also ranked #3, shows a positive ESP of +0.22% ($1.00 Most Accurate vs. $0.99 consensus) before its September 11, 2025 earnings. The positive ESP figures for both companies signal a statistical likelihood of them beating their respective quarterly earnings forecasts.

Key Decisions for Investors

• Investors could consider establishing short-term, tactical bullish positions in McDonald's (MCD) and Kroger (KR) ahead of their upcoming earnings announcements to capitalize on a potential price appreciation following a likely earnings beat.
• It is important to note that both companies carry a Zacks Rank of #3 (Hold), suggesting their fundamentals point towards in-line market performance, which may temper the upside from an earnings surprise and frames this as a potentially short-term catalyst rather than a long-term buy signal.
• Beyond these specific tickers, portfolio managers should consider incorporating the Zacks Earnings ESP filter as a systematic screening tool to identify other potential earnings surprise candidates across various sectors.