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 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.
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 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 MSCI?
The last thing we will do today, now that we have a grasp on the ESP and how powerful of a tool it can be, is to quickly look at a qualifying stock. MSCI (MSCI) holds a #2 (Buy) at the moment and its Most Accurate Estimate comes in at $4.93 a share four days away from its upcoming earnings release on July 21, 2026.
By taking the percentage difference between the $4.93 Most Accurate Estimate and the $4.89 Zacks Consensus Estimate, MSCI has an Earnings ESP of +0.83%. Investors should also know that MSCI 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.
MSCI is just one of a large group of Finance stocks with a positive ESP figure. Virtu Financial (VIRT) is another qualifying stock you may want to consider.
Virtu Financial, which is readying to report earnings on July 30, 2026, sits at a Zacks Rank #3 (Hold) right now. Its Most Accurate Estimate is currently $1.72 a share, and VIRT is 13 days out from its next earnings report.
The Zacks Consensus Estimate for Virtu Financial is $1.67, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +3.25%.
Because both stocks hold a positive Earnings ESP, MSCI and VIRT 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 MSCI Inc (MSCI)?
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This article originally published on Zacks Investment Research (zacks.com).