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.
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 Expected Surprise Prediction, or ESP, works by locking in on the most up-to-date analyst earnings revisions because they can be more accurate than estimates from weeks or even months before the actual release date. The thinking is pretty straightforward: analysts who provide earnings estimates closer to the report are likely to have more 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.
Most stocks, about 60%, fall into the #3 (Hold) category, and they are expected to perform in-line with the broader market. Stocks with a #2 (Buy) and #1 (Strong Buy) rating, or the top 15% and top 5% of stocks, respectively, should outperform the market, with Strong Buy stocks outperforming more than any other rank.
Should You Consider Orion Marine Group?
The final step today is to look at a stock that meets our ESP qualifications. Orion Marine Group (ORN) earns a #3 (Hold) 29 days from its next quarterly earnings release on March 3, 2026, and its Most Accurate Estimate comes in at $0.06 a share.
ORN has an Earnings ESP figure of +20.00%, which, as explained above, is calculated by taking the percentage difference between the $0.06 Most Accurate Estimate and the Zacks Consensus Estimate of $0.05. Orion Marine Group 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.
ORN is just one of a large group of Construction stocks with a positive ESP figure. Advanced Drainage Systems (WMS) is another qualifying stock you may want to consider.
Slated to report earnings on February 5, 2026, Advanced Drainage Systems holds a #3 (Hold) ranking on the Zacks Rank, and its Most Accurate Estimate is $1.12 a share three days from its next quarterly update.
Advanced Drainage Systems' Earnings ESP figure currently stands at +0.98% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $1.11.
ORN and WMS' 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 >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Orion Group Holdings, Inc. (ORN): Free Stock Analysis Report Advanced Drainage Systems, Inc. (WMS): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
Zacks Investment Research
