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.
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 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.
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.
When we join a positive earnings ESP with a Zacks Rank #3 (Hold) or stronger, stocks posted a positive bottom-line surprise 70% of the time. Plus, this system saw investors produce roughly 28% 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 Fortinet?
The final step today is to look at a stock that meets our ESP qualifications. Fortinet (FTNT) earns a #3 (Hold) nine days from its next quarterly earnings release on November 5, 2025, and its Most Accurate Estimate comes in at $0.66 a share.
By taking the percentage difference between the $0.66 Most Accurate Estimate and the $0.63 Zacks Consensus Estimate, Fortinet has an Earnings ESP of +4.43%. Investors should also know that FTNT 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.
FTNT is one of just a large database of Computer and Technology stocks with positive ESPs. Another solid-looking stock is Micron (MU).
Slated to report earnings on December 17, 2025, Micron holds a #1 (Strong Buy) ranking on the Zacks Rank, and its Most Accurate Estimate is $3.76 a share 51 days from its next quarterly update.
For Micron, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $3.75 is +0.29%.
Because both stocks hold a positive Earnings ESP, FTNT and MU 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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Fortinet, Inc. (FTNT): Free Stock Analysis Report Micron Technology, Inc. (MU): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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