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.
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.
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 Skyward Specialty Insurance?
Now that we understand what the ESP is and how beneficial it can be, let's dive into a stock that currently fits the bill. Skyward Specialty Insurance (SKWD) earns a #3 (Hold) right now and its Most Accurate Estimate sits at $0.94 a share, just 11 days from its upcoming earnings release on February 23, 2026.
SKWD has an Earnings ESP figure of +0.86%, which, as explained above, is calculated by taking the percentage difference between the $0.94 Most Accurate Estimate and the Zacks Consensus Estimate of $0.93. Skyward Specialty Insurance 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.
SKWD is one of just a large database of Finance stocks with positive ESPs. Another solid-looking stock is CME Group (CME).
CME Group is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on April 22, 2026. CME's Most Accurate Estimate sits at $2.97 a share 69 days from its next earnings release.
For CME Group, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $2.96 is +0.46%.
Because both stocks hold a positive Earnings ESP, SKWD and CME could potentially post earnings beats in their next reports.
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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Skyward Specialty Insurance Group, Inc. (SKWD): Free Stock Analysis Report CME Group Inc. (CME): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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