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.
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 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.
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.
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 #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 United Therapeutics?
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. United Therapeutics (UTHR) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at $6.77 a share 29 days away from its upcoming earnings release on April 29, 2026.
United Therapeutics' Earnings ESP sits at +0.74%, which, as explained above, is calculated by taking the percentage difference between the $6.77 Most Accurate Estimate and the Zacks Consensus Estimate of $6.72. UTHR 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.
UTHR is just one of a large group of Medical stocks with a positive ESP figure. CVS Health (CVS) is another qualifying stock you may want to consider.
CVS Health is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on May 7, 2026. CVS' Most Accurate Estimate sits at $2.21 a share 37 days from its next earnings release.
The Zacks Consensus Estimate for CVS Health is $2.20, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +0.45%.
UTHR and CVS' 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 United Therapeutics Corporation (UTHR)?
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United Therapeutics Corporation (UTHR): Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).