Wall Street watches a company's quarterly report closely to understand as much as possible about its recent performance and what to expect going forward. Of course, one figure often stands out among the rest: earnings.
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.
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.
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 Enphase 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. Enphase Energy (ENPH) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at $0.59 a share 22 days away from its upcoming earnings release on February 3, 2026.
ENPH has an Earnings ESP figure of +10.63%, which, as explained above, is calculated by taking the percentage difference between the $0.59 Most Accurate Estimate and the Zacks Consensus Estimate of $0.53. Enphase Energy 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.
ENPH is one of just a large database of Oils and Energy stocks with positive ESPs. Another solid-looking stock is Sunrun (RUN).
Sunrun, which is readying to report earnings on February 26, 2026, sits at a Zacks Rank #2 (Buy) right now. Its Most Accurate Estimate is currently $0.04 a share, and RUN is 45 days out from its next earnings report.
Sunrun's Earnings ESP figure currently stands at +138.75% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of -$0.09.
ENPH and RUN'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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Enphase Energy, Inc. (ENPH): Free Stock Analysis Report Sunrun Inc. (RUN): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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