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.
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 Earnings ESP, or Expected Surprise Prediction, aims to find earnings surprises by focusing on the most recent analyst revisions. The basic premise is that if an analyst reevaluates their earnings estimate ahead of an earnings release, it means they likely have new information that could possibly be more accurate.
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.
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 Amgen?
The final step today is to look at a stock that meets our ESP qualifications. Amgen (AMGN) earns a #3 (Hold) 19 days from its next quarterly earnings release on August 5, 2025, and its Most Accurate Estimate comes in at $5.23 a share.
Amgen's Earnings ESP sits at +0.07%, which, as explained above, is calculated by taking the percentage difference between the $5.23 Most Accurate Estimate and the Zacks Consensus Estimate of $5.22. AMGN 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.
AMGN is part of a big group of Medical stocks that boast a positive ESP, and investors may want to take a look at Humana (HUM) as well.
Humana, which is readying to report earnings on July 30, 2025, sits at a Zacks Rank #3 (Hold) right now. Its Most Accurate Estimate is currently $8.28 a share, and HUM is 13 days out from its next earnings report.
For Humana, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $6.39 is +29.73%.
AMGN and HUM'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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Amgen Inc. (AMGN): Free Stock Analysis Report Humana Inc. (HUM): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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