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 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.
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.
Bringing together a positive earnings ESP alongside a Zacks Rank #3 (Hold) or better has helped stocks report a positive earnings surprise 70% of the time. Furthermore, by using these parameters, investors have seen 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 Tesla?
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. Tesla (TSLA) earns a #3 (Hold) right now and its Most Accurate Estimate sits at $0.58 a share, just five days from its upcoming earnings release on July 22, 2026.
By taking the percentage difference between the $0.58 Most Accurate Estimate and the $0.49 Zacks Consensus Estimate, Tesla has an Earnings ESP of +18.61%. Investors should also know that TSLA 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.
TSLA is just one of a large group of Auto, Tires and Trucks stocks with a positive ESP figure. Paccar (PCAR) is another qualifying stock you may want to consider.
Paccar is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on July 28, 2026. PCAR's Most Accurate Estimate sits at $1.35 a share 11 days from its next earnings release.
The Zacks Consensus Estimate for Paccar is $1.33, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +1.35%.
TSLA and PCAR'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 Tesla, Inc. (TSLA)?
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This article originally published on Zacks Investment Research (zacks.com).