Earnings are arguably the most important single number on a company's quarterly financial report. Wall Street clearly dives into all of the other metrics and management's input, but the EPS figure helps cut through all the noise.
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, 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.
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.
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 Brinker International?
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. Brinker International (EAT) earns a #3 (Hold) right now and its Most Accurate Estimate sits at $3.10 a share, just 22 days from its upcoming earnings release on August 12, 2026.
By taking the percentage difference between the $3.10 Most Accurate Estimate and the $3.08 Zacks Consensus Estimate, Brinker International has an Earnings ESP of +0.60%. Investors should also know that EAT 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.
EAT is just one of a large group of Retail and Wholesale stocks with a positive ESP figure. Wingstop (WING) is another qualifying stock you may want to consider.
Wingstop is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on July 29, 2026. WING's Most Accurate Estimate sits at $1.05 a share eight days from its next earnings release.
For Wingstop, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $1.02 is +2.28%.
EAT and WING'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 Brinker International, Inc. (EAT)?
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This article originally published on Zacks Investment Research (zacks.com).