Earnings are arguably the most important single number on a company's quarterly financial report. Wall Street clearly dives into all of the other metrics and management's input, but the EPS figure helps cut through all the noise.
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.
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 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.
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.
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 United Therapeutics?
The final step today is to look at a stock that meets our ESP qualifications. United Therapeutics (UTHR) earns a #3 (Hold) two days from its next quarterly earnings release on May 6, 2026, and its Most Accurate Estimate comes in at $6.89 a share.
UTHR has an Earnings ESP figure of +2.24%, which, as explained above, is calculated by taking the percentage difference between the $6.89 Most Accurate Estimate and the Zacks Consensus Estimate of $6.73. United Therapeutics 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.
UTHR is just one of a large group of Medical stocks with a positive ESP figure. Zoetis (ZTS) is another qualifying stock you may want to consider.
Zoetis, which is readying to report earnings on May 7, 2026, sits at a Zacks Rank #3 (Hold) right now. Its Most Accurate Estimate is currently $1.63 a share, and ZTS is three days out from its next earnings report.
The Zacks Consensus Estimate for Zoetis is $1.61, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +1.24%.
UTHR and ZTS' 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 United Therapeutics Corporation (UTHR)?
Before you invest in United Therapeutics Corporation (UTHR), want to know the best stocks to buy for the next 30 days? Check out Zacks Investment Research for our free report on the 7 best stocks to buy.
Zacks Investment Research has been committed to providing investors with tools and independent research since 1978. For more than a quarter century, the Zacks Rank stock-rating system has more than doubled the S&P 500 with an average gain of +24.08% per year. (These returns cover a period from January 1, 1988 through May 6, 2024.)
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
United Therapeutics Corporation (UTHR): Free Stock Analysis Report
Zoetis Inc. (ZTS): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).