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 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.
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 Dutch Bros?
The final step today is to look at a stock that meets our ESP qualifications. Dutch Bros (BROS) earns a #2 (Buy) eight days from its next quarterly earnings release on May 6, 2026, and its Most Accurate Estimate comes in at $0.16 a share.
Dutch Bros' Earnings ESP sits at +2.48%, which, as explained above, is calculated by taking the percentage difference between the $0.16 Most Accurate Estimate and the Zacks Consensus Estimate of $0.15. BROS 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.
BROS is one of just a large database of Retail and Wholesale stocks with positive ESPs. Another solid-looking stock is Wayfair (W).
Wayfair, which is readying to report earnings on April 30, 2026, sits at a Zacks Rank #3 (Hold) right now. Its Most Accurate Estimate is currently $0.28 a share, and W is two days out from its next earnings report.
Wayfair's Earnings ESP figure currently stands at +9.80% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $0.26.
BROS and W'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 Dutch Bros Inc. (BROS)?
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Dutch Bros Inc. (BROS): Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).