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

Zacks highlights its Earnings ESP (Expected Surprise Prediction) methodology, which compares the most accurate analyst estimate to the consensus, as a key indicator for identifying stocks likely to beat quarterly earnings. Historically, a positive ESP combined with a Zacks Rank #3 (Hold) or better has predicted positive earnings surprises 70% of the time, yielding 28.3% average annual returns over a decade. The firm points to consumer discretionary stocks Royal Caribbean (RCL), with a +0.29% ESP, and Under Armour (UAA), with a +1.85% ESP, both holding a Zacks Rank #3, as current examples poised for potential earnings beats in their upcoming reports.

Analysis

Zacks' Earnings ESP methodology, which compares the Most Accurate Estimate to the Zacks Consensus Estimate, is presented as a predictive tool for identifying potential earnings surprises. Historically, combining a positive Earnings ESP with a Zacks Rank of #3 (Hold) or better has resulted in positive earnings surprises 70% of the time. This strategy has demonstrated an average annual return of 28.3% over a 10-year backtest, highlighting its potential for identifying outperforming stocks.

Royal Caribbean (RCL) and Under Armour (UAA), both Consumer Discretionary sector companies, currently exhibit these favorable conditions. RCL, with a Zacks Rank #3 and an ESP of +0.29% (Most Accurate Estimate $5.69 vs. Consensus $5.67), is slated to report earnings on October 28, 2025. UAA, also holding a Zacks Rank #3, shows a higher ESP of +1.85% (Most Accurate Estimate $0.03 vs. Consensus $0.02) ahead of its November 6, 2025 report.

The positive Earnings ESP for both RCL and UAA suggests a higher probability of exceeding their respective consensus earnings estimates. While a Zacks Rank #3 typically implies in-line market performance, the added positive ESP signal, based on the backtested success rate, indicates a potential for near-term stock price appreciation post-earnings. This analytical framework focuses on short-term catalysts driven by earnings surprises.

Key Decisions for Investors

• Monitor Royal Caribbean (RCL) and Under Armour (UAA) closely ahead of their earnings reports, as their positive Earnings ESPs suggest a higher probability of beating consensus estimates.
• Evaluate the potential for short-term price appreciation post-earnings, recognizing that a Zacks Rank #3 indicates expected in-line market performance absent a significant surprise.
• Consider the historical 70% success rate of this combined methodology for predicting positive earnings surprises as a factor in short-term trading strategies.