Quarterly financial reports play a vital role on Wall Street, as they help investors see how a company has performed and what might be coming down the road in the near-term. And out of all of the metrics and results to consider, earnings is one of the most important.
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.
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 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.
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.
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.
Most stocks, about 60%, fall into the #3 (Hold) category, and they are expected to perform in-line with the broader market. Stocks with a #2 (Buy) and #1 (Strong Buy) rating, or the top 15% and top 5% of stocks, respectively, should outperform the market, with Strong Buy stocks outperforming more than any other rank.
Should You Consider Pebblebrook Hotel?
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. Pebblebrook Hotel (PEB) earns a #1 (Strong Buy) right now and its Most Accurate Estimate sits at $0.23 a share, just 29 days from its upcoming earnings release on April 28, 2026.
PEB has an Earnings ESP figure of +15.00%, which, as explained above, is calculated by taking the percentage difference between the $0.23 Most Accurate Estimate and the Zacks Consensus Estimate of $0.2. Pebblebrook Hotel 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.
PEB is part of a big group of Finance stocks that boast a positive ESP, and investors may want to take a look at CME Group (CME) as well.
CME Group is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on April 22, 2026. CME's Most Accurate Estimate sits at $3.10 a share 23 days from its next earnings release.
CME Group's Earnings ESP figure currently stands at +3.25% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $3.00.
PEB and CME'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 Pebblebrook Hotel Trust (PEB)?
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Pebblebrook Hotel Trust (PEB): Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).