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.
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.
Now that we know how important earnings and earnings surprises are, it's time to show investors how to take advantage of these events to boost their returns by utilizing the Zacks Earnings ESP filter.
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.
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 Goldman Sachs?
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. Goldman Sachs (GS) earns a #2 (Buy) right now and its Most Accurate Estimate sits at $14.30 a share, just 11 days from its upcoming earnings release on July 14, 2026.
Goldman Sachs' Earnings ESP sits at +2.07%, which, as explained above, is calculated by taking the percentage difference between the $14.30 Most Accurate Estimate and the Zacks Consensus Estimate of $14.01. GS 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.
GS is just one of a large group of Finance stocks with a positive ESP figure. XP Inc.A (XP) is another qualifying stock you may want to consider.
XP Inc.A, which is readying to report earnings on August 17, 2026, sits at a Zacks Rank #3 (Hold) right now. Its Most Accurate Estimate is currently $0.53 a share, and XP is 45 days out from its next earnings report.
For XP Inc.A, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $0.51 is +3.92%.
GS and XP'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 The Goldman Sachs Group, Inc. (GS)?
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This article originally published on Zacks Investment Research (zacks.com).