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.
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 Expected Surprise Prediction, or ESP, works by locking in on the most up-to-date analyst earnings revisions because they can be more accurate than estimates from weeks or even months before the actual release date. The thinking is pretty straightforward: analysts who provide earnings estimates closer to the report are likely to have more 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.
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.
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 FedEx?
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. FedEx (FDX) earns a #3 (Hold) right now and its Most Accurate Estimate sits at $6.40 a share, just 25 days from its upcoming earnings release on June 23, 2026.
FedEx's Earnings ESP sits at +9.92%, which, as explained above, is calculated by taking the percentage difference between the $6.40 Most Accurate Estimate and the Zacks Consensus Estimate of $5.82. FDX 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.
FDX is part of a big group of Transportation stocks that boast a positive ESP, and investors may want to take a look at Alaska Air Group (ALK) as well.
Alaska Air Group is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on July 22, 2026. ALK's Most Accurate Estimate sits at -$0.83 a share 54 days from its next earnings release.
For Alaska Air Group, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of -$0.87 is +4.19%.
FDX and ALK'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 FedEx Corporation (FDX)?
Before you invest in FedEx Corporation (FDX), want to know the best stocks to buy for the next 30 days? Check out Zacks Investment Research for our free report on the 7 best stocks to buy.
Zacks Investment Research has been committed to providing investors with tools and independent research since 1978. For more than a quarter century, the Zacks Rank stock-rating system has more than doubled the S&P 500 with an average gain of +24.08% per year. (These returns cover a period from January 1, 1988 through May 6, 2024.)
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
FedEx Corporation (FDX): Free Stock Analysis Report
Alaska Air Group, Inc. (ALK): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).