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 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.
In fact, when we combined a Zacks Rank #3 (Hold) or better and a positive Earnings ESP, stocks produced a positive surprise 70% of the time. Perhaps most importantly, using these parameters has helped produce 28.3% 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 Walmart?
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. Walmart (WMT) holds a #2 (Buy) at the moment and its Most Accurate Estimate comes in at $0.74 a share 13 days away from its upcoming earnings release on February 19, 2026.
WMT has an Earnings ESP figure of +2.24%, which, as explained above, is calculated by taking the percentage difference between the $0.74 Most Accurate Estimate and the Zacks Consensus Estimate of $0.73. Walmart 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.
WMT is part of a big group of Retail and Wholesale stocks that boast a positive ESP, and investors may want to take a look at Dollar General (DG) as well.
Dollar General, which is readying to report earnings on March 12, 2026, sits at a Zacks Rank #2 (Buy) right now. Its Most Accurate Estimate is currently $1.67 a share, and DG is 34 days out from its next earnings report.
The Zacks Consensus Estimate for Dollar General is $1.57, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +5.95%.
WMT and DG'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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Walmart Inc. (WMT): Free Stock Analysis Report Dollar General Corporation (DG): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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