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.
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.
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.
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 Nucor?
The final step today is to look at a stock that meets our ESP qualifications. Nucor (NUE) earns a #1 (Strong Buy) 28 days from its next quarterly earnings release on July 27, 2026, and its Most Accurate Estimate comes in at $4.46 a share.
By taking the percentage difference between the $4.46 Most Accurate Estimate and the $4.35 Zacks Consensus Estimate, Nucor has an Earnings ESP of +2.60%. Investors should also know that NUE 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.
NUE is just one of a large group of Basic Materials stocks with a positive ESP figure. DuPont de Nemours (DD) is another qualifying stock you may want to consider.
Slated to report earnings on August 4, 2026, DuPont de Nemours holds a #3 (Hold) ranking on the Zacks Rank, and its Most Accurate Estimate is $1.76 a share 36 days from its next quarterly update.
The Zacks Consensus Estimate for DuPont de Nemours is $1.73, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +1.75%.
NUE and DD'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 Nucor Corporation (NUE)?
Before you invest in Nucor Corporation (NUE), 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
Nucor Corporation (NUE): Free Stock Analysis Report
DuPont de Nemours, Inc. (DD): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).