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.
The earnings figure itself is key, of course, but a beat or miss on the bottom line can sometimes be just as, if not more, important. Therefore, investors should consider paying close attention to these earnings surprises, as a big beat can help a stock climb and vice versa.
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.
Now that we understand the basic idea, let's look at how the Expected Surprise Prediction works. The ESP is calculated by comparing the Most Accurate Estimate to the Zacks Consensus Estimate, with the percentage difference between the two giving us the Zacks ESP figure.
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 #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 Archrock Inc.?
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. Archrock Inc. (AROC) holds a #2 (Buy) at the moment and its Most Accurate Estimate comes in at $0.44 a share 14 days away from its upcoming earnings release on October 28, 2025.
By taking the percentage difference between the $0.44 Most Accurate Estimate and the $0.41 Zacks Consensus Estimate, Archrock Inc. has an Earnings ESP of +7.32%. Investors should also know that AROC 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.
AROC 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 HF Sinclair (DINO) as well.
HF Sinclair is a Zacks Rank #1 (Strong Buy) stock, and is getting ready to report earnings on October 30, 2025. DINO's Most Accurate Estimate sits at $1.90 a share 16 days from its next earnings release.
HF Sinclair's Earnings ESP figure currently stands at +18.57% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $1.60.
AROC and DINO's positive ESP metrics may signal that a positive earnings surprise for both stocks is on the horizon.
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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Archrock, Inc. (AROC): Free Stock Analysis Report HF Sinclair Corporation (DINO): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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