Wall Street watches a company’s quarterly report closely to understand as much as possible about its recent performance and what to expect going forward. Of course, one figure often stands out among the rest: earnings.
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.
Stocks with a ranking of #3 (Hold), or 60% of all stocks covered by the Zacks Rank, are expected to perform in-line with the broader market. Stocks with rankings of #2 (Buy) and #1 (Strong Buy), or the top 15% and top 5% of stocks, respectively, should outperform the market; Strong Buy stocks should outperform more than any other rank.
Should You Consider Qualcomm?
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. Qualcomm (QCOM – Free Report) earns a #2 (Buy) right now and its Most Accurate Estimate sits at $2.90 a share, just 19 days from its upcoming earnings release on April 30, 2025.
QCOM has an Earnings ESP figure of +3.41%, which, as explained above, is calculated by taking the percentage difference between the $2.90 Most Accurate Estimate and the Zacks Consensus Estimate of $2.80. Qualcomm 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.
QCOM is one of just a large database of Computer and Technology stocks with positive ESPs. Another solid-looking stock is Affirm Holdings (AFRM – Free Report) .
Affirm Holdings, which is readying to report earnings on May 8, 2025, sits at a Zacks Rank #1 (Strong Buy) right now. It’s Most Accurate Estimate is currently -$0.04 a share, and AFRM is 27 days out from its next earnings report.
Affirm Holdings’ Earnings ESP figure currently stands at +52% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of -$0.08.
QCOM and AFRM’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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