Two factors often determine stock prices in the long run: earnings and interest rates. Investors can't control the latter, but they can focus on a company's earnings results every quarter.
The earnings figure itself is key, of course, but a beat or miss on the bottom line can sometimes be just as, if not more, important. Therefore, investors should consider paying close attention to these earnings surprises, as a big beat can help a stock climb and vice versa.
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 Expected Surprise Prediction, or ESP, works by locking in on the most up-to-date analyst earnings revisions because they can be more accurate than estimates from weeks or even months before the actual release date. The thinking is pretty straightforward: analysts who provide earnings estimates closer to the report are likely to have more information.
The core of the ESP model is comparing the Most Accurate Estimate to the Zacks Consensus Estimate, where the resulting percentage difference between the two equals the Expected Surprise Prediction. The Zacks Rank is also factored into the ESP metric to better help find companies that appear poised to top their next bottom-line consensus estimate, which will hopefully help lift the stock price.
In fact, when we combined a Zacks Rank #3 (Hold) or better and a positive Earnings ESP, stocks produced a positive surprise 70% of the time. Perhaps most importantly, using these parameters has helped produce 28.3% 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 Nextracker?
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. Nextracker (NXT) earns a #3 (Hold) right now and its Most Accurate Estimate sits at $1.09 a share, just 28 days from its upcoming earnings release on August 7, 2025.
Nextracker's Earnings ESP sits at +4.56%, which, as explained above, is calculated by taking the percentage difference between the $1.09 Most Accurate Estimate and the Zacks Consensus Estimate of $1.04. NXT 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.
NXT is one of just a large database of Oils and Energy stocks with positive ESPs. Another solid-looking stock is Civitas Resources (CIVI).
Civitas Resources, which is readying to report earnings on August 7, 2025, sits at a Zacks Rank #3 (Hold) right now. Its Most Accurate Estimate is currently $1.17 a share, and CIVI is 28 days out from its next earnings report.
The Zacks Consensus Estimate for Civitas Resources is $1.11, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +5.27%.
NXT and CIVI'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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Nextracker Inc. (NXT): Free Stock Analysis Report Civitas Resources, Inc. (CIVI): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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