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.
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.
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.
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 Amphenol?
The final step today is to look at a stock that meets our ESP qualifications. Amphenol (APH) earns a #2 (Buy) 16 days from its next quarterly earnings release on July 29, 2026, and its Most Accurate Estimate comes in at $1.18 a share.
Amphenol's Earnings ESP sits at +0.43%, which, as explained above, is calculated by taking the percentage difference between the $1.18 Most Accurate Estimate and the Zacks Consensus Estimate of $1.17. APH 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.
APH is one of just a large database of Computer and Technology stocks with positive ESPs. Another solid-looking stock is Dropbox (DBX).
Slated to report earnings on August 6, 2026, Dropbox holds a #3 (Hold) ranking on the Zacks Rank, and its Most Accurate Estimate is $0.77 a share 24 days from its next quarterly update.
The Zacks Consensus Estimate for Dropbox is $0.74, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +4.52%.
Because both stocks hold a positive Earnings ESP, APH and DBX 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 Amphenol Corporation (APH)?
Before you invest in Amphenol Corporation (APH), 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
Amphenol Corporation (APH): Free Stock Analysis Report
Dropbox, Inc. (DBX): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).