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 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 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 Agree Realty?
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. Agree Realty (ADC) earns a #3 (Hold) right now and its Most Accurate Estimate sits at $1.14 a share, just two days from its upcoming earnings release on July 30, 2026.
Agree Realty's Earnings ESP sits at +0.71%, which, as explained above, is calculated by taking the percentage difference between the $1.14 Most Accurate Estimate and the Zacks Consensus Estimate of $1.13. ADC 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.
ADC is part of a big group of Finance stocks that boast a positive ESP, and investors may want to take a look at Innovative Industrial Properties (IIPR) as well.
Innovative Industrial Properties is a Zacks Rank #2 (Buy) stock, and is getting ready to report earnings on August 3, 2026. IIPR's Most Accurate Estimate sits at $1.81 a share six days from its next earnings release.
For Innovative Industrial Properties, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $1.79 is +0.65%.
ADC and IIPR's positive ESP metrics may signal that a positive earnings surprise for both stocks is on the horizon.
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 Agree Realty Corporation (ADC)?
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Agree Realty Corporation (ADC): Free Stock Analysis Report
Innovative Industrial Properties, Inc. (IIPR): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).