Two factors often determine stock prices in the long run: earnings and interest rates. Investors can't control the latter, but they can focus on a company's earnings results every quarter.
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 Expected Surprise Prediction, or ESP, works by locking in on the most up-to-date analyst earnings revisions because they can be more accurate than estimates from weeks or even months before the actual release date. The thinking is pretty straightforward: analysts who provide earnings estimates closer to the report are likely to have more 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.
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 Edgewell Personal Care?
The final step today is to look at a stock that meets our ESP qualifications. Edgewell Personal Care (EPC) earns a #3 (Hold) two days from its next quarterly earnings release on May 6, 2026, and its Most Accurate Estimate comes in at $0.44 a share.
EPC has an Earnings ESP figure of +2.33%, which, as explained above, is calculated by taking the percentage difference between the $0.44 Most Accurate Estimate and the Zacks Consensus Estimate of $0.43. Edgewell Personal Care 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.
EPC is one of just a large database of Consumer Staples stocks with positive ESPs. Another solid-looking stock is Constellation Brands (STZ).
Constellation Brands is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on July 7, 2026. STZ's Most Accurate Estimate sits at $3.36 a share 64 days from its next earnings release.
For Constellation Brands, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $3.24 is +3.51%.
Because both stocks hold a positive Earnings ESP, EPC and STZ 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 Edgewell Personal Care Company (EPC)?
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Edgewell Personal Care Company (EPC): Free Stock Analysis Report
Constellation Brands Inc (STZ): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).