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.
The earnings figure itself is key, but a beat or miss on the bottom line can sometimes be just as, if not more, important. Therefore, investors should consider paying close attention to these earnings surprises, as a big beat can help a stock climb even higher.
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. Annaly Capital Management (NLY) holds a Zacks Rank #2 at the moment and its Most Accurate Estimate comes in at $0.73 a share 12 days away from its upcoming earnings release on April 30, 2025.
By taking the percentage difference between the $0.73 Most Accurate Estimate and the $0.71 Zacks Consensus Estimate, Annaly Capital Management has an Earnings ESP of 3.55%.
NLY is one of just a large database of Finance stocks with positive ESPs. Another solid-looking stock is Progressive (PGR).
Slated to report earnings on July 15, 2025, Progressive holds a #2 (Buy) ranking on the Zacks Rank, and it's Most Accurate Estimate is $3.52 a share 88 days from its next quarterly update.
The Zacks Consensus Estimate for Progressive is $3.47, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of 1.54%.
NLY and PGR'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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Annaly Capital Management Inc (NLY) : Free Stock Analysis Report
The Progressive Corporation (PGR) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
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