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 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.
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.
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 #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 American Express?
The final step today is to look at a stock that meets our ESP qualifications. American Express (AXP) earns a #3 (Hold) 11 days from its next quarterly earnings release on July 24, 2026, and its Most Accurate Estimate comes in at $4.44 a share.
AXP has an Earnings ESP figure of +0.73%, which, as explained above, is calculated by taking the percentage difference between the $4.44 Most Accurate Estimate and the Zacks Consensus Estimate of $4.41. American Express 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.
AXP is just one of a large group of Finance stocks with a positive ESP figure. Travelers (TRV) is another qualifying stock you may want to consider.
Travelers is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on July 17, 2026. TRV's Most Accurate Estimate sits at $4.97 a share four days from its next earnings release.
For Travelers, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $4.96 is +0.02%.
Because both stocks hold a positive Earnings ESP, AXP and TRV could potentially post earnings beats in their next reports.
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 American Express Company (AXP)?
Before you invest in American Express Company (AXP), 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
American Express Company (AXP): Free Stock Analysis Report
The Travelers Companies, Inc. (TRV): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).