Why Investors Need to Take Advantage of These 2 Utilities Stocks Now

Earnings are arguably the most important single number on a company's quarterly financial report. Wall Street clearly dives into all of the other metrics and management's input, but the EPS figure helps cut through all the noise.

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.

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.

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.

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 Sempra?

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. Sempra (SRE) earns a #2 (Buy) right now and its Most Accurate Estimate sits at $0.84 a share, just one day from its upcoming earnings release on August 7, 2025.

SRE has an Earnings ESP figure of +0.60%, which, as explained above, is calculated by taking the percentage difference between the $0.84 Most Accurate Estimate and the Zacks Consensus Estimate of $0.83. Sempra 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.

SRE is just one of a large group of Utilities stocks with a positive ESP figure. Xcel Energy (XEL) is another qualifying stock you may want to consider.

Xcel Energy, which is readying to report earnings on October 30, 2025, sits at a Zacks Rank #3 (Hold) right now. Its Most Accurate Estimate is currently $1.43 a share, and XEL is 85 days out from its next earnings report.

The Zacks Consensus Estimate for Xcel Energy is $1.38, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +3.07%.

SRE and XEL'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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This article originally published on Zacks Investment Research (zacks.com).

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