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 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.
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.
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 NRG Energy?
The final step today is to look at a stock that meets our ESP qualifications. NRG Energy (NRG) earns a #2 (Buy) 29 days from its next quarterly earnings release on November 6, 2025, and its Most Accurate Estimate comes in at $2.03 a share.
By taking the percentage difference between the $2.03 Most Accurate Estimate and the $1.93 Zacks Consensus Estimate, NRG Energy has an Earnings ESP of +5.18%. Investors should also know that NRG 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.
NRG is just one of a large group of Utilities stocks with a positive ESP figure. Duke Energy (DUK) is another qualifying stock you may want to consider.
Duke Energy is a Zacks Rank #2 (Buy) stock, and is getting ready to report earnings on November 7, 2025. DUK's Most Accurate Estimate sits at $1.74 a share 30 days from its next earnings release.
For Duke Energy, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $1.70 is +2.59%.
Because both stocks hold a positive Earnings ESP, NRG and DUK 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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NRG Energy, Inc. (NRG): Free Stock Analysis Report Duke Energy Corporation (DUK): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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