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.
Life and the stock market are both about expectations, and rising above what is expected is often rewarded, while falling short can come with negative consequences. Investors might want to try to capture stronger returns by finding positive 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.
Now that we understand the basic idea, let's look at how the Expected Surprise Prediction works. The ESP is calculated by comparing the Most Accurate Estimate to the Zacks Consensus Estimate, with the percentage difference between the two giving us the Zacks ESP figure.
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.
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 DTE Energy?
The last thing we will do today, now that we have a grasp on the ESP and how powerful of a tool it can be, is to quickly look at a qualifying stock. DTE Energy (DTE) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at $1.93 a share two days away from its upcoming earnings release on April 30, 2026.
DTE has an Earnings ESP figure of +1.71%, which, as explained above, is calculated by taking the percentage difference between the $1.93 Most Accurate Estimate and the Zacks Consensus Estimate of $1.9. DTE Energy 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.
DTE is one of just a large database of Utilities stocks with positive ESPs. Another solid-looking stock is Dominion Energy (D).
Dominion Energy is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on May 1, 2026. D's Most Accurate Estimate sits at $0.90 a share three days from its next earnings release.
Dominion Energy's Earnings ESP figure currently stands at +1.31% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $0.89.
DTE and D'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 >>
Should You Invest in DTE Energy Company (DTE)?
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DTE Energy Company (DTE): Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).