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 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 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 Deere?
The final step today is to look at a stock that meets our ESP qualifications. Deere (DE) earns a #3 (Hold) 10 days from its next quarterly earnings release on November 20, 2025, and its Most Accurate Estimate comes in at $4.01 a share.
By taking the percentage difference between the $4.01 Most Accurate Estimate and the $3.96 Zacks Consensus Estimate, Deere has an Earnings ESP of +1.26%. Investors should also know that DE 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.
DE is just one of a large group of Industrial Products stocks with a positive ESP figure. Caterpillar (CAT) is another qualifying stock you may want to consider.
Caterpillar, which is readying to report earnings on January 29, 2026, sits at a Zacks Rank #3 (Hold) right now. Its Most Accurate Estimate is currently $4.55 a share, and CAT is 80 days out from its next earnings report.
Caterpillar's Earnings ESP figure currently stands at +0.71% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $4.51.
DE and CAT'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 >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Deere & Company (DE): Free Stock Analysis Report Caterpillar Inc. (CAT): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
Zacks Investment Research
