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 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.
The core of the ESP model is comparing the Most Accurate Estimate to the Zacks Consensus Estimate, where the resulting percentage difference between the two equals the Expected Surprise Prediction. The Zacks Rank is also factored into the ESP metric to better help find companies that appear poised to top their next bottom-line consensus estimate, which will hopefully help lift the stock price.
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 Carpenter Technology?
The final step today is to look at a stock that meets our ESP qualifications. Carpenter Technology (CRS) earns a #2 (Buy) 19 days from its next quarterly earnings release on April 29, 2026, and its Most Accurate Estimate comes in at $2.64 a share.
By taking the percentage difference between the $2.64 Most Accurate Estimate and the $2.59 Zacks Consensus Estimate, Carpenter Technology has an Earnings ESP of +1.89%. Investors should also know that CRS 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.
CRS is just one of a large group of Basic Materials stocks with a positive ESP figure. Pan American Silver (PAAS) is another qualifying stock you may want to consider.
Pan American Silver is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on May 6, 2026. PAAS' Most Accurate Estimate sits at $1.19 a share 26 days from its next earnings release.
The Zacks Consensus Estimate for Pan American Silver is $1.12, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +5.94%.
CRS and PAAS' 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 Carpenter Technology Corporation (CRS)?
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Carpenter Technology Corporation (CRS): Free Stock Analysis Report
Pan American Silver Corp. (PAAS): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).