Looking for a stock that has consistently exceeded earnings estimates and has the potential to continue that streak with its next quarterly report? Walmart (WMT), which belongs to the Zacks Retail – Supermarket industry, is a strong stock to consider. It may be a candidate.
Looking at the past two reports, the world’s largest retailer has posted strong results, beating profit expectations. The company has exceeded estimates by an average of 10.12% over the past two quarters.
For the most recent quarter, Walmart was expected to post earnings of $1.69 per share, but it actually reported earnings of $1.84 per share, delivering a surprise of 8.88%. Last quarter’s consensus estimate was for him to be $1.32 per share while it actually produced $1.47 per share, delivering a surprise of 11.36%.
In Walmart’s case, expectations are trending upwards thanks to this disappointing earnings history. And looking at the stock’s positive Zacks Earnings ESP (Expected Surprise Prediction) is a great indicator of future earnings improvement, especially when combined with a solid Zacks Rank.
Our research shows that stocks with the combination of a positive Earnings ESP and a Zacks Rank #3 (Hold) or higher generate a positive surprise nearly 70% of the time. In other words, if there are 10 stocks in this combination, the number of stocks that beat the consensus estimate could be up to 7.
The Zacks Earnings ESP compares the Most Accurate Estimate to the Zacks Consensus Estimate for the quarter. The Most Accurate Estimate is the Zacks Consensus Version, whose definition is related to change. The idea here is that by revising their forecasts right before an earnings announcement, analysts can get more up-to-date information, and that information is better than what they and other analysts contributing to the consensus had previously predicted. This means that it can also be accurate.
Walmart’s Current Earnings ESP is +1.02%, suggesting that analysts have recently become more bullish on the company’s earnings outlook. This positive Earnings ESP, when combined with the stock’s Zacks Rank #2 (Buy), suggests that another beat could be on the horizon. The company’s next earnings report is scheduled to be released on November 16, 2023.
However, investors should note that while a negative Earnings ESP measurement does not indicate an earnings outlier, negative values do reduce the predictive power of this metric.
Many companies end up beating consensus EPS estimates, but that may not be the only basis for the stock price increase. On the other hand, some stocks may hold their ground even if they beat consensus estimates.
This is why it is so important to check a company’s earnings ESP prior to a quarterly release to increase your chances of success. Be sure to utilize our Earnings ESP filter to find the best stocks to buy or sell before the report is released.
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