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.
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, or Expected Surprise Prediction, aims to find earnings surprises by focusing on the most recent analyst revisions. The basic premise is that if an analyst reevaluates their earnings estimate ahead of an earnings release, it means they likely have new information that could possibly be more accurate.
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.
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 Estee Lauder?
Now that we understand what the ESP is and how beneficial it can be, let's dive into a stock that currently fits the bill. Estee Lauder (EL) earns a #2 (Buy) right now and its Most Accurate Estimate sits at $0.32 a share, just 27 days from its upcoming earnings release on August 19, 2026.
EL has an Earnings ESP figure of +2.72%, which, as explained above, is calculated by taking the percentage difference between the $0.32 Most Accurate Estimate and the Zacks Consensus Estimate of $0.31. Estee Lauder 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.
EL is one of just a large database of Consumer Staples stocks with positive ESPs. Another solid-looking stock is Sysco (SYY).
Sysco is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on August 4, 2026. SYY's Most Accurate Estimate sits at $1.52 a share 12 days from its next earnings release.
For Sysco, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $1.51 is +0.56%.
Because both stocks hold a positive Earnings ESP, EL and SYY 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 The Estee Lauder Companies Inc. (EL)?
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The Estee Lauder Companies Inc. (EL): Free Stock Analysis Report
Sysco Corporation (SYY): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).