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.
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 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.
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 #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 Union Pacific?
The final step today is to look at a stock that meets our ESP qualifications. Union Pacific (UNP) earns a #3 (Hold) 13 days from its next quarterly earnings release on July 23, 2026, and its Most Accurate Estimate comes in at $3.19 a share.
By taking the percentage difference between the $3.19 Most Accurate Estimate and the $3.15 Zacks Consensus Estimate, Union Pacific has an Earnings ESP of +1.35%. Investors should also know that UNP 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.
UNP is just one of a large group of Transportation stocks with a positive ESP figure. Kirby (KEX) is another qualifying stock you may want to consider.
Kirby is a Zacks Rank #2 (Buy) stock, and is getting ready to report earnings on July 29, 2026. KEX's Most Accurate Estimate sits at $1.74 a share 19 days from its next earnings release.
The Zacks Consensus Estimate for Kirby is $1.70, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +2.66%.
UNP and KEX'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 >>
Should You Invest in Union Pacific Corporation (UNP)?
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Union Pacific Corporation (UNP): Free Stock Analysis Report
Kirby Corporation (KEX): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).