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.
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.
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.
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 Polaris Inc?
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. Polaris Inc (PII) earns a #3 (Hold) right now and its Most Accurate Estimate sits at -$0.35 a share, just 29 days from its upcoming earnings release on April 28, 2026.
Polaris Inc's Earnings ESP sits at +17.45%, which, as explained above, is calculated by taking the percentage difference between the -$0.35 Most Accurate Estimate and the Zacks Consensus Estimate of -$0.42. PII is also part of a large group of stocks that boast a positive ESP. Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they've reported.
PII is one of just a large database of Auto, Tires and Trucks stocks with positive ESPs. Another solid-looking stock is Magna (MGA).
Slated to report earnings on May 1, 2026, Magna holds a #1 (Strong Buy) ranking on the Zacks Rank, and its Most Accurate Estimate is $1.16 a share 32 days from its next quarterly update.
Magna's Earnings ESP figure currently stands at +12.26% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $1.03.
PII and MGA'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 Polaris Inc. (PII)?
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Polaris Inc. (PII): Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).