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.
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 Johnson & Johnson?
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. Johnson & Johnson (JNJ) earns a #3 (Hold) right now and its Most Accurate Estimate sits at $2.79 a share, just 29 days from its upcoming earnings release on April 21, 2026.
By taking the percentage difference between the $2.79 Most Accurate Estimate and the $2.69 Zacks Consensus Estimate, Johnson & Johnson has an Earnings ESP of +3.91%. Investors should also know that JNJ 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.
JNJ is part of a big group of Medical stocks that boast a positive ESP, and investors may want to take a look at Agilent Technologies (A) as well.
Slated to report earnings on May 27, 2026, Agilent Technologies holds a #3 (Hold) ranking on the Zacks Rank, and its Most Accurate Estimate is $1.41 a share 65 days from its next quarterly update.
The Zacks Consensus Estimate for Agilent Technologies is $1.40, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +0.68%.
JNJ and A's 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 Johnson & Johnson (JNJ)?
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This article originally published on Zacks Investment Research (zacks.com).