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

The article outlines the Zacks Earnings ESP tool, a quantitative methodology for predicting positive earnings surprises by comparing the most accurate analyst estimate against the consensus. Historically, combining a positive ESP with a Zacks Rank of #3 or stronger has resulted in a 70% success rate for positive bottom-line surprises and an average 28% annual return over a decade. The analysis highlights consumer discretionary stocks MGM Resorts (MGM) and DraftKings (DKNG) as current examples exhibiting significant positive ESPs, indicating potential earnings beats in their upcoming reports and offering a systematic approach for investors to identify earnings-driven trading opportunities.

Analysis

The provided analysis identifies a quantitative signal suggesting a potential for near-term earnings beats for two consumer discretionary stocks, MGM Resorts (MGM) and DraftKings (DKNG). The core of the thesis rests on the Zacks Earnings Expected Surprise Prediction (ESP), a metric that measures the percentage difference between the most recent analyst forecast and the consensus estimate. According to the source's back-tested data, a positive ESP combined with a Zacks Rank of #3 (Hold) or better has historically preceded a positive earnings surprise 70% of the time. For MGM, the ESP is a significant +20.88%, a result of its Most Accurate Estimate of $0.68 per share exceeding the consensus of $0.57 ahead of its July 30, 2025 report. Similarly, DraftKings exhibits an even stronger ESP of +21.81%, with its Most Accurate Estimate at $0.54 versus a consensus of $0.44 for its August 7, 2025 earnings. While these ESP figures point towards a potential short-term catalyst from an earnings beat, this is contrasted by their neutral Zacks Rank of #3 (Hold), which suggests an expectation of in-line market performance, indicating that the underlying fundamental outlook may not be as bullish as the short-term earnings revision momentum implies.

Key Decisions for Investors

• Investors with a short-term, catalyst-driven approach could consider tactical long positions in MGM and DKNG ahead of their late July and early August 2025 earnings reports to potentially capitalize on a positive surprise.
• It is crucial to balance the positive ESP signal against the neutral #3 (Hold) rating for both stocks, which may temper the magnitude or duration of any post-earnings rally.
• Monitor analyst estimate revisions for both companies closely as the reporting dates approach, as the ESP is a dynamic indicator and its predictive value can change with new information.
• Consider this signal as a prompt for deeper due diligence into the fundamental drivers causing these upward revisions, particularly regarding consumer spending trends impacting the gaming and resort industries.