Quarterly financial reports play a vital role on Wall Street, as they help investors see how a company has performed and what might be coming down the road in the near-term. And out of all of the metrics and results to consider, earnings is one of the most important.
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.
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.
Bringing together a positive earnings ESP alongside a Zacks Rank #3 (Hold) or better has helped stocks report a positive earnings surprise 70% of the time. Furthermore, by using these parameters, investors have seen 28.3% 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 Caterpillar?
Now that we understand what the ESP is and how beneficial it can be, let's dive into a stock that currently fits the bill. Caterpillar (CAT) earns a #2 (Buy) right now and its Most Accurate Estimate sits at $4.61 a share, just 13 days from its upcoming earnings release on January 29, 2026.
By taking the percentage difference between the $4.61 Most Accurate Estimate and the $4.56 Zacks Consensus Estimate, Caterpillar has an Earnings ESP of +1.08%. Investors should also know that CAT 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.
CAT is one of just a large database of Industrial Products stocks with positive ESPs. Another solid-looking stock is Hubbell (HUBB).
Hubbell, which is readying to report earnings on February 3, 2026, sits at a Zacks Rank #3 (Hold) right now. Its Most Accurate Estimate is currently $4.72 a share, and HUBB is 18 days out from its next earnings report.
Hubbell's Earnings ESP figure currently stands at +0.52% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $4.70.
CAT and HUBB'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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Caterpillar Inc. (CAT): Free Stock Analysis Report Hubbell Inc (HUBB): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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