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.
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 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.
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 Halozyme Therapeutics?
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. Halozyme Therapeutics (HALO) earns a #3 (Hold) right now and its Most Accurate Estimate sits at $1.65 a share, just 12 days from its upcoming earnings release on November 3, 2025.
By taking the percentage difference between the $1.65 Most Accurate Estimate and the $1.63 Zacks Consensus Estimate, Halozyme Therapeutics has an Earnings ESP of +1.48%. Investors should also know that HALO 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.
HALO is just one of a large group of Medical stocks with a positive ESP figure. Humana (HUM) is another qualifying stock you may want to consider.
Humana, which is readying to report earnings on November 5, 2025, sits at a Zacks Rank #2 (Buy) right now. Its Most Accurate Estimate is currently $3.04 a share, and HUM is 14 days out from its next earnings report.
Humana's Earnings ESP figure currently stands at +4.29% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $2.91.
Because both stocks hold a positive Earnings ESP, HALO and HUM 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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Halozyme Therapeutics, Inc. (HALO): Free Stock Analysis Report Humana Inc. (HUM): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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