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.
Life and the stock market are both about expectations, and rising above what is expected is often rewarded, while falling short can come with negative consequences. Investors might want to try to capture stronger returns by finding positive 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, 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.
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.
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 Brinker International?
The final step today is to look at a stock that meets our ESP qualifications. Brinker International (EAT) earns a #3 (Hold) 14 days from its next quarterly earnings release on August 13, 2025, and its Most Accurate Estimate comes in at $2.45 a share.
EAT has an Earnings ESP figure of +0.93%, which, as explained above, is calculated by taking the percentage difference between the $2.45 Most Accurate Estimate and the Zacks Consensus Estimate of $2.43. Brinker International 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.
EAT is one of just a large database of Retail and Wholesale stocks with positive ESPs. Another solid-looking stock is On Holding (ONON).
On Holding, which is readying to report earnings on August 12, 2025, sits at a Zacks Rank #3 (Hold) right now. Its Most Accurate Estimate is currently $0.27 a share, and ONON is 13 days out from its next earnings report.
The Zacks Consensus Estimate for On Holding is $0.24, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +14.89%.
EAT and ONON'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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Brinker International, Inc. (EAT): Free Stock Analysis Report On Holding AG (ONON): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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