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.
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.
The ability to identify stocks that are likely to top quarterly earnings expectations can be profitable, but it's no simple task. Here at Zacks, our Earnings ESP filter helps make things easier.
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.
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 CVR Energy?
The final step today is to look at a stock that meets our ESP qualifications. CVR Energy (CVI) earns a #3 (Hold) 30 days from its next quarterly earnings release on November 4, 2026, and its Most Accurate Estimate comes in at $2.15 a share.
By taking the percentage difference between the $2.15 Most Accurate Estimate and the $1.59 Zacks Consensus Estimate, CVR Energy has an Earnings ESP of +35.65%. Investors should also know that CVI 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.
CVI is just one of a large group of Oils and Energy stocks with a positive ESP figure. Plains All American Pipeline (PAA) is another qualifying stock you may want to consider.
Slated to report earnings on November 6, 2026, Plains All American Pipeline holds a #3 (Hold) ranking on the Zacks Rank, and its Most Accurate Estimate is $0.43 a share 32 days from its next quarterly update.
For Plains All American Pipeline, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $0.42 is +2.69%.
CVI and PAA'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 CVR Energy Inc. (CVI)?
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CVR Energy Inc. (CVI): Free Stock Analysis Report
Plains All American Pipeline, L.P. (PAA): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).