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.
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 Nucor?
The final step today is to look at a stock that meets our ESP qualifications. Nucor (NUE) earns a #2 (Buy) four days from its next quarterly earnings release on April 28, 2025, and its Most Accurate Estimate comes in at $0.72 a share.
NUE has an Earnings ESP figure of +6.17%, which, as explained above, is calculated by taking the percentage difference between the $0.72 Most Accurate Estimate and the Zacks Consensus Estimate of $0.68. Nucor 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.
NUE is one of just a large database of Basic Materials stocks with positive ESPs. Another solid-looking stock is Steel Dynamics (STLD).
Slated to report earnings on July 16, 2025, Steel Dynamics holds a #2 (Buy) ranking on the Zacks Rank, and it's Most Accurate Estimate is $2.71 a share 83 days from its next quarterly update.
Steel Dynamics' Earnings ESP figure currently stands at +10.63% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $2.45.
NUE and STLD'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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Nucor Corporation (NUE): Free Stock Analysis Report Steel Dynamics, Inc. (STLD): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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