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.
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.
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.
With this in mind, the Expected Surprise Prediction compares the Most Accurate Estimate (being the most recent) against the overall Zacks Consensus Estimate. The percentage difference provides the ESP figure. The system also utilizes our core Zacks Rank to provide a stronger system for identifying stocks that might beat their next quarterly earnings estimate and possibly see the stock price climb.
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.
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 Parker-Hannifin?
The last thing we will do today, now that we have a grasp on the ESP and how powerful of a tool it can be, is to quickly look at a qualifying stock. Parker-Hannifin (PH) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at $6.84 a share 29 days away from its upcoming earnings release on October 30, 2025.
By taking the percentage difference between the $6.84 Most Accurate Estimate and the $6.74 Zacks Consensus Estimate, Parker-Hannifin has an Earnings ESP of +1.54%. Investors should also know that PH is one of a large group 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.
PH is just one of a large group of Industrial Products stocks with a positive ESP figure. Emerson Electric (EMR) is another qualifying stock you may want to consider.
Emerson Electric is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on November 4, 2025. EMR's Most Accurate Estimate sits at $1.65 a share 34 days from its next earnings release.
For Emerson Electric, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $1.62 is +1.96%.
PH and EMR'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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Parker-Hannifin Corporation (PH): Free Stock Analysis Report Emerson Electric Co. (EMR): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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