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.
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 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.
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 Progressive?
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. Progressive (PGR) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at $4.80 a share 14 days away from its upcoming earnings release on July 15, 2026.
By taking the percentage difference between the $4.80 Most Accurate Estimate and the $4.55 Zacks Consensus Estimate, Progressive has an Earnings ESP of +5.49%. Investors should also know that PGR 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.
PGR is part of a big group of Finance stocks that boast a positive ESP, and investors may want to take a look at Prologis (PLD) as well.
Slated to report earnings on July 16, 2026, Prologis holds a #2 (Buy) ranking on the Zacks Rank, and its Most Accurate Estimate is $1.55 a share 15 days from its next quarterly update.
Prologis' Earnings ESP figure currently stands at +1.31% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $1.53.
Because both stocks hold a positive Earnings ESP, PGR and PLD 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 Progressive Corporation (PGR)?
Before you invest in The Progressive Corporation (PGR), want to know the best stocks to buy for the next 30 days? Check out Zacks Investment Research for our free report on the 7 best stocks to buy.
Zacks Investment Research has been committed to providing investors with tools and independent research since 1978. For more than a quarter century, the Zacks Rank stock-rating system has more than doubled the S&P 500 with an average gain of +24.08% per year. (These returns cover a period from January 1, 1988 through May 6, 2024.)
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
The Progressive Corporation (PGR): Free Stock Analysis Report
Prologis, Inc. (PLD): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).