Ways to Strengthen Your Portfolio with Leading Retail and Wholesale Stocks Poised to Surpass Earnings Expectations

Understanding the Importance of Earnings Reports

When companies release their quarterly financial statements, the earnings per share (EPS) figure is often the focal point for investors. While analysts and the market consider a variety of financial metrics and management commentary, EPS provides a clear snapshot of a company's profitability, helping investors cut through the complexity.

The Role of Expectations in the Stock Market

Both in investing and in life, expectations play a crucial role. Companies that exceed market expectations are typically rewarded, while those that fall short may see their stock prices decline. For investors seeking to outperform the market, identifying stocks likely to deliver positive earnings surprises can be a valuable strategy.

How to Spot Potential Earnings Surprises

Predicting which companies will surpass earnings forecasts isn't easy. However, Zacks offers a tool called the Earnings ESP filter to help simplify this process and improve your chances of success.

What Is the Zacks Earnings ESP?

The Earnings ESP, or Expected Surprise Prediction, is designed to give investors an edge by focusing on the most recent analyst estimate changes before a company reports earnings. The logic is straightforward: newer estimates may incorporate the latest available information, making them more accurate.

This tool compares the Most Accurate Estimate (the latest analyst forecast) to the Zacks Consensus Estimate. The percentage difference between these two numbers is the Earnings ESP. When combined with the Zacks Rank—a proprietary stock rating system—this approach helps identify companies that are more likely to beat their upcoming earnings estimates, potentially driving their stock prices higher.

Historically, when a stock with a Zacks Rank #3 (Hold) or better also has a positive Earnings ESP, it has delivered a positive earnings surprise about 70% of the time. According to a decade-long backtest, this strategy has generated average annual returns of roughly 28%.

About 60% of stocks are rated as Zacks Rank #3 (Hold), which typically means they are expected to perform in line with the market. Stocks rated #2 (Buy) and #1 (Strong Buy)—the top 15% and top 5% of all stocks, respectively—are expected to outperform, with Strong Buy stocks leading the way.

Case Study: Williams-Sonoma (WSM)

To illustrate how the Earnings ESP works, let's examine a current example. Williams-Sonoma (WSM) currently holds a Zacks Rank #2 (Buy). Its Most Accurate Estimate for the upcoming earnings report, scheduled for March 18, 2026, is $2.90 per share—just 14 days away.

With a Zacks Consensus Estimate of $2.89, the Earnings ESP for WSM is +0.35%. This positive ESP suggests that Williams-Sonoma could deliver an earnings surprise. You can use the Earnings ESP Filter to find more stocks with similar potential before their results are announced.

Another Stock to Watch: Texas Roadhouse (TXRH)

Williams-Sonoma isn't alone among Retail and Wholesale stocks with a positive ESP. Texas Roadhouse (TXRH) is another candidate worth considering. TXRH, which is set to report earnings on May 14, 2026, currently has a Zacks Rank #3 (Hold) and a Most Accurate Estimate of $1.86 per share—71 days ahead of its next report.

The Zacks Consensus Estimate for TXRH stands at $1.85, resulting in an Earnings ESP of +0.94%. These positive ESP readings for both WSM and TXRH could indicate the potential for earnings surprises.

How to Find the Best Stocks Before Earnings

Leverage the Zacks Earnings ESP Filter to identify stocks most likely to surprise—either positively or negatively—so you can make informed buy or sell decisions ahead of earnings announcements. Explore the tool here >>

Is Williams-Sonoma, Inc. (WSM) a Good Investment?

If you're considering investing in Williams-Sonoma, Inc. (WSM), you may also want to discover the top stocks to buy for the next month. Zacks Investment Research offers a complimentary report on the 7 best stocks to consider now.

Since 1978, Zacks Investment Research has provided investors with independent analysis and tools. Over the past 25+ years, the Zacks Rank stock-rating system has delivered an average annual gain of +24.08%, more than doubling the S&P 500's performance from January 1, 1988, through May 6, 2024.

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Williams-Sonoma, Inc. (WSM): Free Stock Analysis Report

Texas Roadhouse, Inc. (TXRH): Free Stock Analysis Report

This article was originally published by Zacks Investment Research.

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