Why Investors Need to Take Advantage of These 2 Consumer Discretionary Stocks Now

Two factors often determine stock prices in the long run: earnings and interest rates. Investors can't control the latter, but they can focus on a company's earnings results every quarter.

We know earnings results are vital, but how a company performs compared to bottom line expectations can be even more important when it comes to stock prices, especially in the near-term. This means that investors might want to take advantage of these earnings surprises.

Now that we know how important earnings and earnings surprises are, it's time to show investors how to take advantage of these events to boost their returns by utilizing the Zacks Earnings ESP filter.

The Zacks Earnings ESP, Explained

The Zacks Earnings ESP is more formally known as the Expected Surprise Prediction, and it aims to grab the inside track on the latest analyst estimate revisions ahead of a company's report. The idea is relatively intuitive as a newer projection might be based on more complete information.

With this in mind, the Expected Surprise Prediction compares the Most Accurate Estimate (being the most recent) against the overall Zacks Consensus Estimate. The percentage difference provides the ESP figure. The system also utilizes our core Zacks Rank to provide a stronger system for identifying stocks that might beat their next quarterly earnings estimate and possibly see the stock price climb.

When we join a positive earnings ESP with a Zacks Rank #3 (Hold) or stronger, stocks posted a positive bottom-line surprise 70% of the time. Plus, this system saw investors produce roughly 28% annual returns on average, according to our 10 year backtest.

Most stocks, about 60%, fall into the #3 (Hold) category, and they are expected to perform in-line with the broader market. Stocks with a #2 (Buy) and #1 (Strong Buy) rating, or the top 15% and top 5% of stocks, respectively, should outperform the market, with Strong Buy stocks outperforming more than any other rank.

Should You Consider MGM Resorts?

The last thing we will do today, now that we have a grasp on the ESP and how powerful of a tool it can be, is to quickly look at a qualifying stock. MGM Resorts (MGM) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at $0.43 a share 30 days away from its upcoming earnings release on October 29, 2025.

MGM has an Earnings ESP figure of +3.84%, which, as explained above, is calculated by taking the percentage difference between the $0.43 Most Accurate Estimate and the Zacks Consensus Estimate of $0.42. MGM Resorts is one of a large database of stocks with positive ESPs. Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they've reported.

MGM is one of just a large database of Consumer Discretionary stocks with positive ESPs. Another solid-looking stock is Ralph Lauren (RL).

Ralph Lauren, which is readying to report earnings on November 6, 2025, sits at a Zacks Rank #1 (Strong Buy) right now. Its Most Accurate Estimate is currently $3.35 a share, and RL is 38 days out from its next earnings report.

The Zacks Consensus Estimate for Ralph Lauren is $3.30, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +1.52%.

MGM and RL's positive ESP figures tell us that both stocks have a good chance at beating analyst expectations in their next earnings report.

Find Stocks to Buy or Sell Before They're Reported

Use the Zacks Earnings ESP Filter to turn up stocks with the highest probability of positively, or negatively, surprising to buy or sell before they're reported for profitable earnings season trading. Check it out here >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research