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.
We know earnings results are vital, but how a company performs compared to bottom line expectations can be even more important when it comes to stock prices, especially in the near-term. This means that investors might want to take advantage of these earnings surprises.
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.
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.
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.
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 Autodesk?
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. Autodesk (ADSK) earns a #3 (Hold) right now and its Most Accurate Estimate sits at $2.85 a share, just 14 days from its upcoming earnings release on May 28, 2026.
ADSK has an Earnings ESP figure of +0.35%, which, as explained above, is calculated by taking the percentage difference between the $2.85 Most Accurate Estimate and the Zacks Consensus Estimate of $2.84. Autodesk 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.
ADSK is part of a big group of Computer and Technology stocks that boast a positive ESP, and investors may want to take a look at Cisco Systems (CSCO) as well.
Slated to report earnings on August 12, 2026, Cisco Systems holds a #2 (Buy) ranking on the Zacks Rank, and its Most Accurate Estimate is $1.10 a share 90 days from its next quarterly update.
For Cisco Systems, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $1.08 is +1.85%.
ADSK and CSCO'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 Autodesk, Inc. (ADSK)?
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Autodesk, Inc. (ADSK): Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).