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 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. DTE Energy (DTE) holds a Zacks Rank #2 at the moment and its Most Accurate Estimate comes in at $2.01 a share six days away from its upcoming earnings release on May 1, 2025.
By taking the percentage difference between the $2.01 Most Accurate Estimate and the $1.98 Zacks Consensus Estimate, DTE Energy has an Earnings ESP of 1.64%.
DTE is one of just a large database of Utilities stocks with positive ESPs. Another solid-looking stock is Atmos Energy (ATO).
Slated to report earnings on May 7, 2025, Atmos Energy holds a #2 (Buy) ranking on the Zacks Rank, and it’s Most Accurate Estimate is $2.93 a share 12 days from its next quarterly update.
For Atmos Energy, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $2.89 is 1.33%.
Because both stocks hold a positive Earnings ESP, DTE and ATO 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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