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.
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 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.
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 Cloudflare?
The final step today is to look at a stock that meets our ESP qualifications. Cloudflare (NET) earns a #2 (Buy) 18 days from its next quarterly earnings release on February 10, 2026, and its Most Accurate Estimate comes in at $0.28 a share.
NET has an Earnings ESP figure of +0.92%, which, as explained above, is calculated by taking the percentage difference between the $0.28 Most Accurate Estimate and the Zacks Consensus Estimate of $0.27. Cloudflare is one of a large database 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.
NET is just one of a large group of Computer and Technology stocks with a positive ESP figure. Amphenol (APH) is another qualifying stock you may want to consider.
Amphenol, which is readying to report earnings on January 28, 2026, sits at a Zacks Rank #1 (Strong Buy) right now. Its Most Accurate Estimate is currently $0.96 a share, and APH is five days out from its next earnings report.
Amphenol's Earnings ESP figure currently stands at +3.78% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $0.93.
NET and APH'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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Cloudflare, Inc. (NET): Free Stock Analysis Report Amphenol Corporation (APH): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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