Quarterly financial reports play a vital role on Wall Street, as they help investors see how a company has performed and what might be coming down the road in the near-term. And out of all of the metrics and results to consider, earnings is one of the most important.
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.
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 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.
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 General Mills?
The final step today is to look at a stock that meets our ESP qualifications. General Mills (GIS – Free Report) earns a #3 (Hold) 30 days from its next quarterly earnings release on March 19, 2025, and its Most Accurate Estimate comes in at $1.11 a share.
General Mills’ Earnings ESP sits at +7.77%, which, as explained above, is calculated by taking the percentage difference between the $1.11 Most Accurate Estimate and the Zacks Consensus Estimate of $1.03. GIS 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.
GIS is one of just a large database of Consumer Staples stocks with positive ESPs. Another solid-looking stock is Molson Coors Brewing (TAP – Free Report) .
Molson Coors Brewing, which is readying to report earnings on April 29, 2025, sits at a Zacks Rank #3 (Hold) right now. It’s Most Accurate Estimate is currently $0.85 a share, and TAP is 71 days out from its next earnings report.
For Molson Coors Brewing, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $0.84 is +1.42%.
GIS and TAP’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 >>
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