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.
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 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.
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.
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 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 Tyson Foods?
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. Tyson Foods (TSN) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at $1.01 a share 10 days away from its upcoming earnings release on February 2, 2026.
Tyson Foods' Earnings ESP sits at +4.48%, which, as explained above, is calculated by taking the percentage difference between the $1.01 Most Accurate Estimate and the Zacks Consensus Estimate of $0.97. TSN 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.
TSN is just one of a large group of Consumer Staples stocks with a positive ESP figure. Estee Lauder (EL) is another qualifying stock you may want to consider.
Estee Lauder is a Zacks Rank #2 (Buy) stock, and is getting ready to report earnings on February 5, 2026. EL's Most Accurate Estimate sits at $0.88 a share 13 days from its next earnings release.
The Zacks Consensus Estimate for Estee Lauder is $0.82, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +6.81%.
TSN and EL'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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Tyson Foods, Inc. (TSN): Free Stock Analysis Report The Estee Lauder Companies Inc. (EL): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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