Wall Street watches a company's quarterly report closely to understand as much as possible about its recent performance and what to expect going forward. Of course, one figure often stands out among the rest: earnings.
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 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.
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.
When we join a positive earnings ESP with a Zacks Rank #3 (Hold) or stronger, stocks posted a positive bottom-line surprise 70% of the time. Plus, this system saw investors produce roughly 28% 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 Jabil?
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. Jabil (JBL) holds a #2 (Buy) at the moment and its Most Accurate Estimate comes in at $3.16 a share one day away from its upcoming earnings release on June 17, 2026.
Jabil's Earnings ESP sits at +1.12%, which, as explained above, is calculated by taking the percentage difference between the $3.16 Most Accurate Estimate and the Zacks Consensus Estimate of $3.12. JBL is also part of a large group of stocks that boast a positive ESP. Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they've reported.
JBL is just one of a large group of Computer and Technology stocks with a positive ESP figure. BILL Holdings (BILL) is another qualifying stock you may want to consider.
BILL Holdings is a Zacks Rank #1 (Strong Buy) stock, and is getting ready to report earnings on August 26, 2026. BILL's Most Accurate Estimate sits at $0.71 a share 71 days from its next earnings release.
For BILL Holdings, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $0.67 is +5.97%.
JBL and BILL'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 Jabil, Inc. (JBL)?
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This article originally published on Zacks Investment Research (zacks.com).