Why Kohl’s (KSS) Is Poised to Beat Earnings Estimates Again

Have you been looking for a stock that could be in a good position to continue its strong performance streak in the upcoming report? It is worth paying attention to Kohl’s (KSS), which belongs to the Zacks Retail – Regional Department Stores industry.

Looking at the last two reports, the department store operator has had a strong streak of beating earnings estimates. Over the last two quarters, the company has exceeded estimates by an average of 45.28%.

Kohl’s was expected to earn $1.24 per share for the most recent quarter, but instead reported earnings of $1.67 per share, representing a surprise of 34.68%. The consensus estimate for the prior quarter was $0.34 per share when it actually delivered $0.53 per share, representing a surprise of 55.88%.

Price and EPS surprise

Thanks in part to this history, Kohl’s has recently seen favorable earnings estimate revisions. In fact, the stock’s ESP (expected surprise) is positive, which is an excellent indicator of earnings growth, especially when combined with its solid Zacks Rank.

Our research shows that stocks with the combination of a positive Earnings ESP and a Zacks Rank #3 (Hold) or better produce a positive surprise nearly 70% of the time. In other words, if you have 10 stocks in this combination, the number of stocks that beat the consensus could be as high as seven.

The Zacks Earnings ESP compares the Most Accurate Estimates to the Zacks Consensus Estimates for the quarter; The Most Accurate Estimate is the Zacks Consensus version, which is defined in terms of change. The idea is that analysts reviewing their estimates just before an earnings release have the latest information, which could potentially be more accurate than what they and other consensus participants had previously predicted.

Kohl’s ESP is currently +121.95%, which suggests that analysts have recently become optimistic about the company’s earnings prospects. This positive Earnings ESP combined with the stock’s Zacks Rank #3 (Hold) indicates that another rally is likely just around the corner. We expect the company’s next earnings report to be published on May 30, 2024.

However, investors should remember that a negative earnings ESP reading does not mean a loss of earnings, but a negative value reduces the predictive power of the metric.

Many companies end up beating consensus EPS estimates, but that may not be the only basis for their stock’s rise. On the other hand, some stocks may hold even if they fall short of the consensus price.

For this reason, it is very important to check a company’s earnings ESP before its quarterly release to increase the chances of success. Use our Earnings ESP filter to find the best stocks to buy or sell before they report.

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