Quarterly financial reports play a vital role on Wall Street, as they help investors see how a company has performed and what might be coming down the road in the near-term. And out of all of the metrics and results to consider, earnings is one of the most important.
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.
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 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.
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.
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 Carpenter Technology?
The final step today is to look at a stock that meets our ESP qualifications. Carpenter Technology (CRS) earns a #1 (Strong Buy) two days from its next quarterly earnings release on July 30, 2026, and its Most Accurate Estimate comes in at $3.06 a share.
Carpenter Technology's Earnings ESP sits at +1.02%, which, as explained above, is calculated by taking the percentage difference between the $3.06 Most Accurate Estimate and the Zacks Consensus Estimate of $3.03. CRS 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.
CRS is part of a big group of Basic Materials stocks that boast a positive ESP, and investors may want to take a look at Nucor (NUE) as well.
Nucor, which is readying to report earnings on October 26, 2026, sits at a Zacks Rank #3 (Hold) right now. Its Most Accurate Estimate is currently $5.07 a share, and NUE is 90 days out from its next earnings report.
Nucor's Earnings ESP figure currently stands at +0.12% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $5.06.
CRS and NUE'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 Carpenter Technology Corporation (CRS)?
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Carpenter Technology Corporation (CRS): Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).