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.
We know earnings results are vital, but how a company performs compared to bottom line expectations can be even more important when it comes to stock prices, especially in the near-term. This means that investors might want to take advantage of these 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.
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.
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 Chubb?
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. Chubb (CB) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at $6.45 a share 19 days away from its upcoming earnings release on October 21, 2025.
By taking the percentage difference between the $6.45 Most Accurate Estimate and the $5.51 Zacks Consensus Estimate, Chubb has an Earnings ESP of +17.15%. Investors should also know that CB 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.
CB is just one of a large group of Finance stocks with a positive ESP figure. Toronto-Dominion Bank (TD) is another qualifying stock you may want to consider.
Toronto-Dominion Bank is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on December 4, 2025. TD's Most Accurate Estimate sits at $1.49 a share 63 days from its next earnings release.
The Zacks Consensus Estimate for Toronto-Dominion Bank is $1.44, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +3.29%.
Because both stocks hold a positive Earnings ESP, CB and TD 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 >>
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Chubb Limited (CB): Free Stock Analysis Report Toronto Dominion Bank (The) (TD): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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