Earnings are arguably the most important single number on a company's quarterly financial report. Wall Street clearly dives into all of the other metrics and management's input, but the EPS figure helps cut through all the noise.
The earnings figure itself is key, of course, but a beat or miss on the bottom line can sometimes be just as, if not more, important. Therefore, investors should consider paying close attention to these earnings surprises, as a big beat can help a stock climb and vice versa.
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.
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.
Most stocks, about 60%, fall into the #3 (Hold) category, and they are expected to perform in-line with the broader market. Stocks with a #2 (Buy) and #1 (Strong Buy) rating, or the top 15% and top 5% of stocks, respectively, should outperform the market, with Strong Buy stocks outperforming more than any other rank.
Should You Consider PBF 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. PBF Energy (PBF) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at -$0.39 a share 29 days away from its upcoming earnings release on February 12, 2026.
PBF Energy's Earnings ESP sits at +14.25%, which, as explained above, is calculated by taking the percentage difference between the -$0.39 Most Accurate Estimate and the Zacks Consensus Estimate of -$0.45. PBF 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.
PBF is part of a big group of Oils and Energy stocks that boast a positive ESP, and investors may want to take a look at TC Energy (TRP) as well.
TC Energy is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on February 13, 2026. TRP's Most Accurate Estimate sits at $0.69 a share 30 days from its next earnings release.
The Zacks Consensus Estimate for TC Energy is $0.68, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +2.07%.
PBF and TRP'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 >>
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PBF Energy Inc. (PBF): Free Stock Analysis Report TC Energy Corporation (TRP): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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