How to Find Strong Utilities Stocks Slated for Positive Earnings Surprises

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 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.

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.

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 DTE Energy?

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. DTE Energy (DTE) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at $2.01 a share 16 days away from its upcoming earnings release on April 24, 2025.

DTE Energy's Earnings ESP sits at +1.69%, which, as explained above, is calculated by taking the percentage difference between the $2.01 Most Accurate Estimate and the Zacks Consensus Estimate of $1.98. DTE 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.

DTE is part of a big group of Utilities stocks that boast a positive ESP, and investors may want to take a look at Brookfield Renewable Energy Partners (BEP) as well.

Brookfield Renewable Energy Partners, which is readying to report earnings on May 2, 2025, sits at a Zacks Rank #3 (Hold) right now. It's Most Accurate Estimate is currently -$0.22 a share, and BEP is 24 days out from its next earnings report.

For Brookfield Renewable Energy Partners, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of -$0.25 is +11.11%.

DTE and BEP'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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This article originally published on Zacks Investment Research (zacks.com).

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