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.
Life and the stock market are both about expectations, and rising above what is expected is often rewarded, while falling short can come with negative consequences. Investors might want to try to capture stronger returns by finding positive earnings surprises.
Now that we know how important earnings and earnings surprises are, it's time to show investors how to take advantage of these events to boost their returns by utilizing the Zacks Earnings ESP filter.
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 Occidental Petroleum?
The final step today is to look at a stock that meets our ESP qualifications. Occidental Petroleum (OXY) earns a #3 (Hold) 14 days from its next quarterly earnings release on August 5, 2026, and its Most Accurate Estimate comes in at $2.05 a share.
By taking the percentage difference between the $2.05 Most Accurate Estimate and the $1.95 Zacks Consensus Estimate, Occidental Petroleum has an Earnings ESP of +4.82%. Investors should also know that OXY 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.
OXY is one of just a large database of Oils and Energy stocks with positive ESPs. Another solid-looking stock is Energy Transfer LP (ET).
Energy Transfer LP, which is readying to report earnings on August 4, 2026, sits at a Zacks Rank #1 (Strong Buy) right now. Its Most Accurate Estimate is currently $0.47 a share, and ET is 13 days out from its next earnings report.
For Energy Transfer LP, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $0.37 is +26.17%.
Because both stocks hold a positive Earnings ESP, OXY and ET 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 Occidental Petroleum Corporation (OXY)?
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Occidental Petroleum Corporation (OXY): Free Stock Analysis Report
Energy Transfer LP (ET): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).