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.
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 Expected Surprise Prediction, or ESP, works by locking in on the most up-to-date analyst earnings revisions because they can be more accurate than estimates from weeks or even months before the actual release date. The thinking is pretty straightforward: analysts who provide earnings estimates closer to the report are likely to have more 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.
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 BP?
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. BP (BP) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at $0.73 a share 25 days away from its upcoming earnings release on November 4, 2025.
BP's Earnings ESP sits at +4.27%, which, as explained above, is calculated by taking the percentage difference between the $0.73 Most Accurate Estimate and the Zacks Consensus Estimate of $0.7. BP is also part of a large group of stocks that boast a positive ESP. Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they've reported.
BP is part of a big group of Oils and Energy stocks that boast a positive ESP, and investors may want to take a look at Cenovus Energy (CVE) as well.
Cenovus Energy is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on October 31, 2025. CVE's Most Accurate Estimate sits at $0.51 a share 21 days from its next earnings release.
For Cenovus Energy, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $0.45 is +13.33%.
BP and CVE'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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BP p.l.c. (BP): Free Stock Analysis Report Cenovus Energy Inc (CVE): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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