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.
Life and the stock market are both about expectations, and rising above what is expected is often rewarded, while falling short can come with negative consequences. Investors might want to try to capture stronger returns by finding positive earnings surprises.
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, 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.
Now that we understand the basic idea, let's look at how the Expected Surprise Prediction works. The ESP is calculated by comparing the Most Accurate Estimate to the Zacks Consensus Estimate, with the percentage difference between the two giving us the Zacks ESP figure.
Bringing together a positive earnings ESP alongside a Zacks Rank #3 (Hold) or better has helped stocks report a positive earnings surprise 70% of the time. Furthermore, by using these parameters, investors have seen 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 Brinker International?
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. Brinker International (EAT) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at $2.90 a share one day away from its upcoming earnings release on April 29, 2026.
Brinker International's Earnings ESP sits at +1.60%, which, as explained above, is calculated by taking the percentage difference between the $2.90 Most Accurate Estimate and the Zacks Consensus Estimate of $2.85. EAT 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.
EAT is one of just a large database of Retail and Wholesale stocks with positive ESPs. Another solid-looking stock is On Holding (ONON).
On Holding is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on May 12, 2026. ONON's Most Accurate Estimate sits at $0.36 a share 14 days from its next earnings release.
For On Holding, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $0.35 is +1.70%.
Because both stocks hold a positive Earnings ESP, EAT and ONON 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 Brinker International, Inc. (EAT)?
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Brinker International, Inc. (EAT): Free Stock Analysis Report
On Holding AG (ONON): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).