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.
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 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.
The core of the ESP model is comparing the Most Accurate Estimate to the Zacks Consensus Estimate, where the resulting percentage difference between the two equals the Expected Surprise Prediction. The Zacks Rank is also factored into the ESP metric to better help find companies that appear poised to top their next bottom-line consensus estimate, which will hopefully help lift the stock price.
When we join a positive earnings ESP with a Zacks Rank #3 (Hold) or stronger, stocks posted a positive bottom-line surprise 70% of the time. Plus, this system saw investors produce roughly 28% 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 O'Reilly Automotive?
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. O'Reilly Automotive (ORLY) earns a #3 (Hold) right now and its Most Accurate Estimate sits at $0.95 a share, just six days from its upcoming earnings release on October 28, 2026.
ORLY has an Earnings ESP figure of +2.11%, which, as explained above, is calculated by taking the percentage difference between the $0.95 Most Accurate Estimate and the Zacks Consensus Estimate of $0.93. O'Reilly Automotive 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.
ORLY is just one of a large group of Retail and Wholesale stocks with a positive ESP figure. Burlington Stores (BURL) is another qualifying stock you may want to consider.
Slated to report earnings on November 24, 2026, Burlington Stores holds a #3 (Hold) ranking on the Zacks Rank, and its Most Accurate Estimate is $1.74 a share 33 days from its next quarterly update.
The Zacks Consensus Estimate for Burlington Stores is $1.71, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +1.86%.
ORLY and BURL'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 O'Reilly Automotive, Inc. (ORLY)?
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O'Reilly Automotive, Inc. (ORLY): Free Stock Analysis Report
Burlington Stores, Inc. (BURL): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).