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.
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.
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 Dell Technologies?
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. Dell Technologies (DELL) earns a #1 (Strong Buy) right now and its Most Accurate Estimate sits at $5.26 a share, just one day from its upcoming earnings release on September 1, 2026.
DELL has an Earnings ESP figure of +6.20%, which, as explained above, is calculated by taking the percentage difference between the $5.26 Most Accurate Estimate and the Zacks Consensus Estimate of $4.95. Dell Technologies is one of a large database 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.
DELL is just one of a large group of Computer and Technology stocks with a positive ESP figure. Arista Networks (ANET) is another qualifying stock you may want to consider.
Arista Networks, which is readying to report earnings on November 3, 2026, sits at a Zacks Rank #1 (Strong Buy) right now. Its Most Accurate Estimate is currently $1.08 a share, and ANET is 64 days out from its next earnings report.
The Zacks Consensus Estimate for Arista Networks is $1.06, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +1.68%.
Because both stocks hold a positive Earnings ESP, DELL and ANET 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 Dell Technologies Inc. (DELL)?
Before you invest in Dell Technologies Inc. (DELL), 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
Dell Technologies Inc. (DELL): Free Stock Analysis Report
Arista Networks, Inc. (ANET): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).