Two factors often determine stock prices in the long run: earnings and interest rates. Investors can't control the latter, but they can focus on a company's earnings results every quarter.
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 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. The core of the ESP model is comparing the Most Accurate Estimate to the Zacks Consensus Estimate, where the resulting percentage difference between the two equals the Expected Surprise Prediction.
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. Archer Daniels Midland (ADM) holds a Zacks Rank #3 at the moment and its Most Accurate Estimate comes in at $0.73 a share 11 days away from its upcoming earnings release on May 6, 2025.
Archer Daniels Midland's Earnings ESP sits at 6.57%, which, as explained above, is calculated by taking the percentage difference between the $0.73 Most Accurate Estimate and the Zacks Consensus Estimate of $0.69.
ADM is part of a big group of Consumer Staples stocks that boast a positive ESP, and investors may want to take a look at Ollie's Bargain Outlet (OLLI) as well.
Ollie's Bargain Outlet, which is readying to report earnings on June 4, 2025, sits at a Zacks Rank #3 (Hold) right now. It's Most Accurate Estimate is currently $0.71 a share, and OLLI is 40 days out from its next earnings report.
Ollie's Bargain Outlet's Earnings ESP figure currently stands at 1.64% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $0.70.
Because both stocks hold a positive Earnings ESP, ADM and OLLI could potentially post earnings beats in their next reports.
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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Archer Daniels Midland Company (ADM) : Free Stock Analysis Report
Ollie's Bargain Outlet Holdings, Inc. (OLLI) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
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