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.
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.
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 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.
The core of the ESP model is comparing the Most Accurate Estimate to the Zacks Consensus Estimate, where the resulting percentage difference between the two equals the Expected Surprise Prediction. The Zacks Rank is also factored into the ESP metric to better help find companies that appear poised to top their next bottom-line consensus estimate, which will hopefully help lift the stock price.
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.
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 Goldman Sachs?
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. Goldman Sachs (GS) earns a #3 (Hold) right now and its Most Accurate Estimate sits at $11.11 a share, just six days from its upcoming earnings release on October 14, 2025.
GS has an Earnings ESP figure of +1.68%, which, as explained above, is calculated by taking the percentage difference between the $11.11 Most Accurate Estimate and the Zacks Consensus Estimate of $10.93. Goldman Sachs 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.
GS is one of just a large database of Finance stocks with positive ESPs. Another solid-looking stock is Wells Fargo (WFC).
Slated to report earnings on October 14, 2025, Wells Fargo holds a #3 (Hold) ranking on the Zacks Rank, and its Most Accurate Estimate is $1.56 a share six days from its next quarterly update.
For Wells Fargo, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $1.54 is +1.02%.
GS and WFC'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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The Goldman Sachs Group, Inc. (GS): Free Stock Analysis Report Wells Fargo & Company (WFC): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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