How to Boost Your Portfolio with Top Consumer Discretionary Stocks Set to Beat Earnings

Earnings are arguably the most important single number on a company's quarterly financial report. Wall Street clearly dives into all of the other metrics and management's input, but the EPS figure helps cut through all the noise.

Life and the stock market are both about expectations, and rising above what is expected is often rewarded, while falling short can come with negative consequences. Investors might want to try to capture stronger returns by finding positive earnings surprises.

The ability to identify stocks that are likely to top quarterly earnings expectations can be profitable, but it's no simple task. Here at Zacks, our Earnings ESP filter helps make things easier.

The Zacks Earnings ESP, Explained

The Zacks Earnings ESP, or Expected Surprise Prediction, aims to find earnings surprises by focusing on the most recent analyst revisions. The basic premise is that if an analyst reevaluates their earnings estimate ahead of an earnings release, it means they likely have new information that could possibly be more accurate.

Now that we understand the basic idea, let's look at how the Expected Surprise Prediction works. The ESP is calculated by comparing the Most Accurate Estimate to the Zacks Consensus Estimate, with the percentage difference between the two giving us the Zacks ESP figure.

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 Caesars Entertainment?

Now that we understand what the ESP is and how beneficial it can be, let's dive into a stock that currently fits the bill. Caesars Entertainment (CZR) earns a #3 (Hold) right now and its Most Accurate Estimate sits at -$0.13 a share, just five days from its upcoming earnings release on April 29, 2025.

Caesars Entertainment's Earnings ESP sits at +27.9%, which, as explained above, is calculated by taking the percentage difference between the -$0.13 Most Accurate Estimate and the Zacks Consensus Estimate of -$0.18. CZR is also part of a large group of stocks that boast a positive ESP. Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they've reported.

CZR is part of a big group of Consumer Discretionary stocks that boast a positive ESP, and investors may want to take a look at Malibu Boats (MBUU) as well.

Slated to report earnings on May 1, 2025, Malibu Boats holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is $0.74 a share seven days from its next quarterly update.

For Malibu Boats, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $0.67 is +10.04%.

CZR and MBUU's positive ESP metrics may signal that a positive earnings surprise for both stocks is on the horizon.

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 >>

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

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