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.
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 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.
Bringing together a positive earnings ESP alongside a Zacks Rank #3 (Hold) or better has helped stocks report a positive earnings surprise 70% of the time. Furthermore, by using these parameters, investors have seen 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 Enterprise Products Partners?
The final step today is to look at a stock that meets our ESP qualifications. Enterprise Products Partners (EPD) earns a #3 (Hold) 25 days from its next quarterly earnings release on May 5, 2026, and its Most Accurate Estimate comes in at $0.72 a share.
By taking the percentage difference between the $0.72 Most Accurate Estimate and the $0.71 Zacks Consensus Estimate, Enterprise Products Partners has an Earnings ESP of +1.32%. Investors should also know that EPD is one of a large group 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.
EPD is part of a big group of Oils and Energy stocks that boast a positive ESP, and investors may want to take a look at Western Midstream (WES) as well.
Western Midstream, which is readying to report earnings on May 6, 2026, sits at a Zacks Rank #3 (Hold) right now. Its Most Accurate Estimate is currently $0.74 a share, and WES is 26 days out from its next earnings report.
For Western Midstream, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $0.73 is +0.82%.
Because both stocks hold a positive Earnings ESP, EPD and WES 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 >>
Should You Invest in Enterprise Products Partners L.P. (EPD)?
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Zacks Investment Research has been committed to providing investors with tools and independent research since 1978. For more than a quarter century, the Zacks Rank stock-rating system has more than doubled the S&P 500 with an average gain of +24.08% per year. (These returns cover a period from January 1, 1988 through May 6, 2024.)
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Enterprise Products Partners L.P. (EPD): Free Stock Analysis Report
Western Midstream Partners, LP (WES): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).