Two factors often determine stock prices in the long run: earnings and interest rates. Investors can't control the latter, but they can focus on a company's earnings results every quarter.
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 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.
Now that we understand the basic idea, let's look at how the Expected Surprise Prediction works. The ESP is calculated by comparing the Most Accurate Estimate to the Zacks Consensus Estimate, with the percentage difference between the two giving us the Zacks ESP figure.
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 #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 General Dynamics?
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. General Dynamics (GD) earns a #2 (Buy) right now and its Most Accurate Estimate sits at $4.12 a share, just 15 days from its upcoming earnings release on July 29, 2026.
By taking the percentage difference between the $4.12 Most Accurate Estimate and the $3.92 Zacks Consensus Estimate, General Dynamics has an Earnings ESP of +5.05%. Investors should also know that GD 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.
GD is just one of a large group of Aerospace stocks with a positive ESP figure. ATI (ATI) is another qualifying stock you may want to consider.
ATI is a Zacks Rank #2 (Buy) stock, and is getting ready to report earnings on July 30, 2026. ATI's Most Accurate Estimate sits at $1.05 a share 16 days from its next earnings release.
For ATI, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $1.03 is +1.32%.
Because both stocks hold a positive Earnings ESP, GD and ATI 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 General Dynamics Corporation (GD)?
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General Dynamics Corporation (GD): Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).