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.
Life and the stock market are both about expectations, and rising above what is expected is often rewarded, while falling short can come with negative consequences. Investors might want to try to capture stronger returns by finding positive 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 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.
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 Reinsurance Group?
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. Reinsurance Group (RGA) earns a #3 (Hold) right now and its Most Accurate Estimate sits at $6.55 a share, just 23 days from its upcoming earnings release on August 6, 2026.
Reinsurance Group's Earnings ESP sits at +0.42%, which, as explained above, is calculated by taking the percentage difference between the $6.55 Most Accurate Estimate and the Zacks Consensus Estimate of $6.52. RGA 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.
RGA is part of a big group of Finance stocks that boast a positive ESP, and investors may want to take a look at Simon Property (SPG) as well.
Simon Property is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on August 10, 2026. SPG's Most Accurate Estimate sits at $3.25 a share 27 days from its next earnings release.
The Zacks Consensus Estimate for Simon Property is $3.18, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +2.12%.
RGA and SPG's positive ESP metrics may signal that a positive earnings surprise for both stocks is on the horizon.
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 Reinsurance Group of America, Incorporated (RGA)?
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Reinsurance Group of America, Incorporated (RGA): Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).