Earnings are arguably the most important single number on a company's quarterly financial report. Wall Street clearly dives into all of the other metrics and management's input, but the EPS figure helps cut through all the noise.
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.
Now that we know how important earnings and earnings surprises are, it's time to show investors how to take advantage of these events to boost their returns by utilizing the Zacks Earnings ESP filter.
The Zacks Earnings ESP, Explained
The Zacks Earnings ESP is more formally known as the Expected Surprise Prediction, and it aims to grab the inside track on the latest analyst estimate revisions ahead of a company's report. The idea is relatively intuitive as a newer projection might be based on more complete information.
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.
Stocks with a ranking of #3 (Hold), or 60% of all stocks covered by the Zacks Rank, are expected to perform in-line with the broader market. Stocks with rankings of #2 (Buy) and #1 (Strong Buy), or the top 15% and top 5% of stocks, respectively, should outperform the market; Strong Buy stocks should outperform more than any other rank.
Should You Consider Marathon Petroleum?
The final step today is to look at a stock that meets our ESP qualifications. Marathon Petroleum (MPC) earns a #3 (Hold) 29 days from its next quarterly earnings release on August 5, 2025, and its Most Accurate Estimate comes in at $3.59 a share.
MPC has an Earnings ESP figure of +4.99%, which, as explained above, is calculated by taking the percentage difference between the $3.59 Most Accurate Estimate and the Zacks Consensus Estimate of $3.42. Marathon Petroleum 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.
MPC is just one of a large group of Oils and Energy stocks with a positive ESP figure. Chevron (CVX) is another qualifying stock you may want to consider.
Chevron, which is readying to report earnings on August 1, 2025, sits at a Zacks Rank #3 (Hold) right now. It's Most Accurate Estimate is currently $1.74 a share, and CVX is 25 days out from its next earnings report.
The Zacks Consensus Estimate for Chevron is $1.61, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +8.41%.
MPC and CVX'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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Marathon Petroleum Corporation (MPC): Free Stock Analysis Report Chevron Corporation (CVX): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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