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.
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.
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 Skyward Specialty Insurance?
The final step today is to look at a stock that meets our ESP qualifications. Skyward Specialty Insurance (SKWD) earns a #2 (Buy) 20 days from its next quarterly earnings release on November 5, 2026, and its Most Accurate Estimate comes in at $1.31 a share.
SKWD has an Earnings ESP figure of +7.55%, which, as explained above, is calculated by taking the percentage difference between the $1.31 Most Accurate Estimate and the Zacks Consensus Estimate of $1.22. Skyward Specialty Insurance is one of a large database 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.
SKWD is just one of a large group of Finance stocks with a positive ESP figure. Hut 8 (HUT) is another qualifying stock you may want to consider.
Hut 8 is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on November 4, 2026. HUT's Most Accurate Estimate sits at -$1.04 a share 19 days from its next earnings release.
The Zacks Consensus Estimate for Hut 8 is -$1.17, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +11.13%.
Because both stocks hold a positive Earnings ESP, SKWD and HUT 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 Skyward Specialty Insurance Group, Inc. (SKWD)?
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Skyward Specialty Insurance Group, Inc. (SKWD): Free Stock Analysis Report
Hut 8 Corp. (HUT): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).