Quarterly financial reports play a vital role on Wall Street, as they help investors see how a company has performed and what might be coming down the road in the near-term. And out of all of the metrics and results to consider, earnings is one of the most important.
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.
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 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 Virtu Financial?
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. Virtu Financial (VIRT) earns a #1 (Strong Buy) right now and its Most Accurate Estimate sits at $1.72 a share, just 20 days from its upcoming earnings release on April 29, 2026.
By taking the percentage difference between the $1.72 Most Accurate Estimate and the $1.45 Zacks Consensus Estimate, Virtu Financial has an Earnings ESP of +18.89%. Investors should also know that VIRT 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.
VIRT is just one of a large group of Finance stocks with a positive ESP figure. Arch Capital Group (ACGL) is another qualifying stock you may want to consider.
Arch Capital Group, which is readying to report earnings on April 28, 2026, sits at a Zacks Rank #3 (Hold) right now. Its Most Accurate Estimate is currently $2.50 a share, and ACGL is 19 days out from its next earnings report.
For Arch Capital Group, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $2.47 is +1.27%.
Because both stocks hold a positive Earnings ESP, VIRT and ACGL 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 Virtu Financial, Inc. (VIRT)?
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Virtu Financial, Inc. (VIRT): Free Stock Analysis Report
Arch Capital Group Ltd. (ACGL): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).