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 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.
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.
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 Kinross Gold?
The final step today is to look at a stock that meets our ESP qualifications. Kinross Gold (KGC) earns a #1 (Strong Buy) 30 days from its next quarterly earnings release on February 11, 2026, and its Most Accurate Estimate comes in at $0.52 a share.
Kinross Gold's Earnings ESP sits at +4.00%, which, as explained above, is calculated by taking the percentage difference between the $0.52 Most Accurate Estimate and the Zacks Consensus Estimate of $0.5. KGC is also part of a large group of stocks that boast a positive ESP. Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they've reported.
KGC is one of just a large database of Basic Materials stocks with positive ESPs. Another solid-looking stock is Iamgold (IAG).
Iamgold is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on February 19, 2026. IAG's Most Accurate Estimate sits at $0.43 a share 38 days from its next earnings release.
The Zacks Consensus Estimate for Iamgold is $0.41, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +6.17%.
KGC and IAG'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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Kinross Gold Corporation (KGC): Free Stock Analysis Report Iamgold Corporation (IAG): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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