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

Zacks highlights its Earnings ESP (Expected Surprise Prediction) tool, which identifies stocks likely to exceed quarterly earnings estimates by comparing the Most Accurate Estimate to the Zacks Consensus Estimate. This methodology, when combined with a Zacks Rank of #3 (Hold) or better, has historically resulted in positive earnings surprises 70% of the time and generated average annual returns of 28.3% over a 10-year backtest. The article points to General Mills (GIS) and Vital Farms (VITL) as current consumer staples examples with positive ESPs, suggesting potential earnings beats that could present profitable trading opportunities for investors.

Analysis

Based on the Zacks Earnings Expected Surprise Prediction (ESP) model, two consumer staples stocks, General Mills (GIS) and Vital Farms (VITL), are flagged for a heightened probability of exceeding their upcoming quarterly earnings estimates. The model's methodology, which leverages recent analyst estimate revisions, has a reported 70% success rate in predicting positive surprises and historical back-tested annual returns of 28.3% when combined with a Zacks Rank of #3 (Hold) or better. General Mills currently has a positive ESP of +1.33%, derived from its Most Accurate Estimate of $0.82 versus a consensus of $0.81, with its earnings report due in 14 days. Vital Farms shows a more significant positive signal with an ESP of +6.25%, reflecting a Most Accurate Estimate of $0.30 against a consensus of $0.28, ahead of its report in 64 days. Despite both stocks carrying a neutral #3 (Hold) rank, which suggests an expectation of in-line market performance, the positive ESPs indicate a potential short-term catalyst from an earnings beat.

Key Decisions for Investors

• Investors might consider establishing tactical long positions in General Mills and Vital Farms ahead of their earnings reports to potentially capitalize on a positive surprise indicated by the ESP model.
• Given Vital Farms' significantly higher ESP of +6.25% compared to General Mills' +1.33%, it represents a statistically stronger candidate for an earnings beat, which could justify a greater weighting for investors employing this specific quantitative strategy.
• Traders should note that both companies have a Zacks Rank of #3 (Hold), implying an underlying expectation of neutral performance relative to the market, which presents a risk that a potential earnings beat may not translate into significant share price appreciation.