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.
The Zacks Expected Surprise Prediction, or ESP, works by locking in on the most up-to-date analyst earnings revisions because they can be more accurate than estimates from weeks or even months before the actual release date. The thinking is pretty straightforward: analysts who provide earnings estimates closer to the report are likely to have more 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 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 look at a qualifying stock. Murphy USA (MUSA) holds a Zacks Rank #3 at the moment and its Most Accurate Estimate comes in at $3.91 a share 30 days away from its upcoming earnings release on May 7, 2025.
Murphy USA's Earnings ESP sits at 4.34%, which, as explained above, is calculated by taking the percentage difference between the $3.91 Most Accurate Estimate and the Zacks Consensus Estimate of $3.74.
MUSA is just one of a large group of Retail-Wholesale stocks with a positive ESP figure. Home Depot (HD) is another qualifying stock you may want to consider.
Home Depot, which is readying to report earnings on May 20, 2025, sits at a Zacks Rank #3 (Hold) right now. It's Most Accurate Estimate is currently $3.59 a share, and HD is 43 days out from its next earnings report.
Home Depot's Earnings ESP figure currently stands at 0.12% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $3.59.
MUSA and HD's positive ESP figures tell us that both stocks have a good chance at beating analyst expectations in their next earnings report.
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 >>
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Murphy USA Inc. (MUSA) : Free Stock Analysis Report
The Home Depot, Inc. (HD) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
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