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 Earnings ESP, or Expected Surprise Prediction, aims to find earnings surprises by focusing on the most recent analyst revisions. The basic premise is that if an analyst reevaluates their earnings estimate ahead of an earnings release, it means they likely have new information that could possibly be more accurate.
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.
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.
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 Blue Bird?
The final step today is to look at a stock that meets our ESP qualifications. Blue Bird (BLBD) earns a #3 (Hold) 21 days from its next quarterly earnings release on August 5, 2026, and its Most Accurate Estimate comes in at $1.26 a share.
Blue Bird's Earnings ESP sits at +3.00%, which, as explained above, is calculated by taking the percentage difference between the $1.26 Most Accurate Estimate and the Zacks Consensus Estimate of $1.22. BLBD 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.
BLBD is part of a big group of Auto, Tires and Trucks stocks that boast a positive ESP, and investors may want to take a look at Tesla (TSLA) as well.
Tesla, which is readying to report earnings on July 22, 2026, sits at a Zacks Rank #3 (Hold) right now. Its Most Accurate Estimate is currently $0.55 a share, and TSLA is seven days out from its next earnings report.
For Tesla, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $0.47 is +16.12%.
Because both stocks hold a positive Earnings ESP, BLBD and TSLA 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 Blue Bird Corporation (BLBD)?
Before you invest in Blue Bird Corporation (BLBD), 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
Blue Bird Corporation (BLBD): Free Stock Analysis Report
Tesla, Inc. (TSLA): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).