Wall Street watches a company's quarterly report closely to understand as much as possible about its recent performance and what to expect going forward. Of course, one figure often stands out among the rest: earnings.
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, 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.
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.
Bringing together a positive earnings ESP alongside a Zacks Rank #3 (Hold) or better has helped stocks report a positive earnings surprise 70% of the time. Furthermore, by using these parameters, investors have seen 28.3% annual returns on average, according to our 10 year backtest.
Stocks with a #3 (Hold) ranking, which is most stocks covered at 60%, are expected to perform in-line with the broader market. But stocks that fall into the #2 (Buy) and #1 (Strong Buy) ranking, 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 Broadcom Inc.?
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. Broadcom Inc. (AVGO) earns a #2 (Buy) right now and its Most Accurate Estimate sits at $1.68 a share, just three days from its upcoming earnings release on September 4, 2025.
AVGO has an Earnings ESP figure of +1.16%, which, as explained above, is calculated by taking the percentage difference between the $1.68 Most Accurate Estimate and the Zacks Consensus Estimate of $1.66. Broadcom Inc. 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.
AVGO is part of a big group of Computer and Technology stocks that boast a positive ESP, and investors may want to take a look at Clear Secure (YOU) as well.
Clear Secure, which is readying to report earnings on November 6, 2025, sits at a Zacks Rank #1 (Strong Buy) right now. Its Most Accurate Estimate is currently $0.28 a share, and YOU is 66 days out from its next earnings report.
Clear Secure's Earnings ESP figure currently stands at +2.80% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $0.27.
Because both stocks hold a positive Earnings ESP, AVGO and YOU could potentially post earnings beats in their next reports.
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 >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Broadcom Inc. (AVGO): Free Stock Analysis Report CLEAR Secure, Inc. (YOU): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
Zacks Investment Research
