These 2 Consumer Staples Stocks Could Beat Earnings: Why They Should Be on Your Radar

Zacks is promoting its Earnings ESP (Expected Surprise Prediction) tool, designed to identify stocks likely to post positive earnings surprises by comparing the Most Accurate Estimate to the Zacks Consensus Estimate. Historically, combining a positive ESP with a Zacks Rank #3 (Hold) or stronger has predicted positive bottom-line surprises 70% of the time, yielding average annual returns of approximately 28% over a 10-year backtest. The firm highlights Mondelez (MDLZ) and Colgate-Palmolive (CL) as current examples with positive ESPs, suggesting potential for positive earnings surprises ahead of their upcoming reports.

Analysis

The analysis highlights a proprietary metric, the Zacks Earnings ESP (Expected Surprise Prediction), which aims to forecast earnings beats by identifying recent upward revisions in analyst estimates. According to the source's 10-year backtest, a positive ESP combined with a Zacks Rank of #3 (Hold) or better has historically predicted a positive earnings surprise 70% of the time, generating average annual returns of approximately 28%. The report applies this model to two Consumer Staples stocks: Mondelez (MDLZ) and Colgate-Palmolive (CL). Mondelez currently holds a #3 (Hold) rank and a positive ESP of +3.33%, with its Most Accurate Estimate at $0.87 against a consensus of $0.84 ahead of its November 6 report. Similarly, Colgate-Palmolive has a #2 (Buy) rank and a positive ESP of +1.2%, based on a Most Accurate Estimate of $0.89 versus a consensus of $0.88 for its October 25 report. The positive ESP figures for both companies suggest a statistically significant likelihood of them exceeding consensus earnings expectations in their upcoming quarterly announcements.

Key Decisions for Investors

• Investors with a focus on event-driven or catalyst trading may view the positive Earnings ESP for MDLZ (+3.33%) and CL (+1.2%) as a tactical indicator for potential upside ahead of their earnings releases.
• Given the 70% historical success rate cited for this indicator, portfolio managers could consider these signals as a justification to review and potentially increase exposure to these Consumer Staples names, particularly CL due to its stronger #2 (Buy) rank.
• It is crucial to recognize that this analysis is based on a single proprietary forecasting tool and should be corroborated with broader fundamental analysis before making significant capital allocation decisions.
• Traders should monitor analyst estimate revisions for both companies closely in the days leading up to their reports, as a change in the ESP figure could alter the probability of an earnings surprise.