Two factors often determine stock prices in the long run: earnings and interest rates. Investors can't control the latter, but they can focus on a company's earnings results every quarter.
We know earnings results are vital, but how a company performs compared to bottom line expectations can be even more important when it comes to stock prices, especially in the near-term. This means that investors might want to take advantage of these earnings surprises.
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 Bank of Nova Scotia?
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. Bank of Nova Scotia (BNS) earns a #2 (Buy) right now and its Most Accurate Estimate sits at $1.43 a share, just five days from its upcoming earnings release on February 24, 2026.
BNS has an Earnings ESP figure of +0.12%, which, as explained above, is calculated by taking the percentage difference between the $1.43 Most Accurate Estimate and the Zacks Consensus Estimate of $1.42. Bank of Nova Scotia 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.
BNS is part of a big group of Finance stocks that boast a positive ESP, and investors may want to take a look at Prologis (PLD) as well.
Prologis, which is readying to report earnings on April 15, 2026, sits at a Zacks Rank #2 (Buy) right now. Its Most Accurate Estimate is currently $1.48 a share, and PLD is 55 days out from its next earnings report.
The Zacks Consensus Estimate for Prologis is $1.47, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +0.20%.
BNS and PLD'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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Bank of Nova Scotia (The) (BNS): Free Stock Analysis Report Prologis, Inc. (PLD): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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