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.
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.
Most stocks, about 60%, fall into the #3 (Hold) category, and they are expected to perform in-line with the broader market. Stocks with a #2 (Buy) and #1 (Strong Buy) rating, or the top 15% and top 5% of stocks, respectively, should outperform the market, with Strong Buy stocks outperforming more than any other rank.
Should You Consider Hasbro?
The last thing we will do today, now that we have a grasp on the ESP and how powerful of a tool it can be, is to quickly look at a qualifying stock. Hasbro (HAS) holds a #2 (Buy) at the moment and its Most Accurate Estimate comes in at $1.18 a share 18 days away from its upcoming earnings release on July 21, 2026.
Hasbro's Earnings ESP sits at +1.23%, 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. HAS 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.
HAS is just one of a large group of Consumer Discretionary stocks with a positive ESP figure. AMC Entertainment (AMC) is another qualifying stock you may want to consider.
Slated to report earnings on August 10, 2026, AMC Entertainment holds a #3 (Hold) ranking on the Zacks Rank, and its Most Accurate Estimate is $0.03 a share 38 days from its next quarterly update.
For AMC Entertainment, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of -$0.03 is +220.00%.
Because both stocks hold a positive Earnings ESP, HAS and AMC 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 Hasbro, Inc. (HAS)?
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This article originally published on Zacks Investment Research (zacks.com).