Earnings are arguably the most important single number on a company's quarterly financial report. Wall Street clearly dives into all of the other metrics and management's input, but the EPS figure helps cut through all the noise.
The earnings figure itself is key, of course, but a beat or miss on the bottom line can sometimes be just as, if not more, important. Therefore, investors should consider paying close attention to these earnings surprises, as a big beat can help a stock climb and vice versa.
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.
In fact, when we combined a Zacks Rank #3 (Hold) or better and a positive Earnings ESP, stocks produced a positive surprise 70% of the time. Perhaps most importantly, using these parameters has helped produce 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 Delta Air Lines?
The final step today is to look at a stock that meets our ESP qualifications. Delta Air Lines (DAL) earns a #3 (Hold) eight days from its next quarterly earnings release on July 10, 2026, and its Most Accurate Estimate comes in at $1.45 a share.
By taking the percentage difference between the $1.45 Most Accurate Estimate and the $1.44 Zacks Consensus Estimate, Delta Air Lines has an Earnings ESP of +0.56%. Investors should also know that DAL is one of a large group 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.
DAL is part of a big group of Transportation stocks that boast a positive ESP, and investors may want to take a look at Union Pacific (UNP) as well.
Union Pacific is a Zacks Rank #2 (Buy) stock, and is getting ready to report earnings on July 23, 2026. UNP's Most Accurate Estimate sits at $3.21 a share 21 days from its next earnings release.
For Union Pacific, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $3.14 is +2.09%.
DAL and UNP'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 Delta Air Lines, Inc. (DAL)?
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Delta Air Lines, Inc. (DAL): Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).