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.
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.
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 #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 Petrobras?
The final step today is to look at a stock that meets our ESP qualifications. Petrobras (PBR) earns a #3 (Hold) 30 days from its next quarterly earnings release on February 25, 2026, and its Most Accurate Estimate comes in at $0.65 a share.
By taking the percentage difference between the $0.65 Most Accurate Estimate and the $0.52 Zacks Consensus Estimate, Petrobras has an Earnings ESP of +25.00%. Investors should also know that PBR 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.
PBR is just one of a large group of Oils and Energy stocks with a positive ESP figure. Plains All American Pipeline (PAA) is another qualifying stock you may want to consider.
Slated to report earnings on February 6, 2026, Plains All American Pipeline holds a #3 (Hold) ranking on the Zacks Rank, and its Most Accurate Estimate is $0.55 a share 11 days from its next quarterly update.
For Plains All American Pipeline, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $0.48 is +15.06%.
PBR and PAA'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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Petroleo Brasileiro S.A.- Petrobras (PBR): Free Stock Analysis Report Plains All American Pipeline, L.P. (PAA): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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