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.
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.
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 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.
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 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 Estee Lauder?
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. Estee Lauder (EL) holds a #2 (Buy) at the moment and its Most Accurate Estimate comes in at $0.86 a share 27 days away from its upcoming earnings release on February 5, 2026.
EL has an Earnings ESP figure of +3.82%, which, as explained above, is calculated by taking the percentage difference between the $0.86 Most Accurate Estimate and the Zacks Consensus Estimate of $0.82. Estee Lauder is one of a large database 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.
EL is just one of a large group of Consumer Staples stocks with a positive ESP figure. Tyson Foods (TSN) is another qualifying stock you may want to consider.
Slated to report earnings on February 2, 2026, Tyson Foods holds a #3 (Hold) ranking on the Zacks Rank, and its Most Accurate Estimate is $1.00 a share 24 days from its next quarterly update.
The Zacks Consensus Estimate for Tyson Foods is $0.97, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +2.93%.
EL and TSN'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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The Estee Lauder Companies Inc. (EL): Free Stock Analysis Report Tyson Foods, Inc. (TSN): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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