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.
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 #3 (Hold) ranking, which is most stocks covered at 60%, are expected to perform in-line with the broader market. But stocks that fall into the #2 (Buy) and #1 (Strong Buy) ranking, 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 Northrop Grumman?
The final step today is to look at a stock that meets our ESP qualifications. Northrop Grumman (NOC) earns a #3 (Hold) eight days from its next quarterly earnings release on April 21, 2026, and its Most Accurate Estimate comes in at $6.09 a share.
By taking the percentage difference between the $6.09 Most Accurate Estimate and the $6.08 Zacks Consensus Estimate, Northrop Grumman has an Earnings ESP of +0.22%. Investors should also know that NOC 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.
NOC is one of just a large database of Aerospace stocks with positive ESPs. Another solid-looking stock is RTX (RTX).
RTX, which is readying to report earnings on April 21, 2026, sits at a Zacks Rank #3 (Hold) right now. Its Most Accurate Estimate is currently $1.55 a share, and RTX is eight days out from its next earnings report.
The Zacks Consensus Estimate for RTX is $1.52, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +1.68%.
Because both stocks hold a positive Earnings ESP, NOC and RTX 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 Northrop Grumman Corporation (NOC)?
Before you invest in Northrop Grumman Corporation (NOC), want to know the best stocks to buy for the next 30 days? Check out Zacks Investment Research for our free report on the 7 best stocks to buy.
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.)
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Northrop Grumman Corporation (NOC): Free Stock Analysis Report
RTX Corporation (RTX): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).