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.
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.
Now that we understand the basic idea, let's look at how the Expected Surprise Prediction works. The ESP is calculated by comparing the Most Accurate Estimate to the Zacks Consensus Estimate, with the percentage difference between the two giving us the Zacks ESP figure.
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 MasterCard?
The final step today is to look at a stock that meets our ESP qualifications. MasterCard (MA) earns a #3 (Hold) 14 days from its next quarterly earnings release on January 29, 2026, and its Most Accurate Estimate comes in at $4.23 a share.
By taking the percentage difference between the $4.23 Most Accurate Estimate and the $4.21 Zacks Consensus Estimate, MasterCard has an Earnings ESP of +0.54%. Investors should also know that MA 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.
MA is one of just a large database of Business Services stocks with positive ESPs. Another solid-looking stock is Trane Technologies (TT).
Slated to report earnings on January 29, 2026, Trane Technologies holds a #3 (Hold) ranking on the Zacks Rank, and its Most Accurate Estimate is $2.84 a share 14 days from its next quarterly update.
Trane Technologies' Earnings ESP figure currently stands at +0.54% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $2.82.
MA and TT'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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Mastercard Incorporated (MA): Free Stock Analysis Report Trane Technologies plc (TT): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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