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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.
We know earnings results are vital, but how a company performs compared to bottom line expectations can be even more important when it comes to stock prices, especially in the near-term. This means that investors might want to take advantage of these earnings surprises.
2 Stocks to Add to Your Watchlist
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. Urban Outfitters (URBN) holds a Zacks Rank #3 at the moment and its Most Accurate Estimate comes in at $0.82 a share 13 days away from its upcoming earnings release on May 21, 2025.
By taking the percentage difference between the $0.82 Most Accurate Estimate and the $0.81 Zacks Consensus Estimate, Urban Outfitters has an Earnings ESP of 1.03%.
URBN is just one of a large group of Retail-Wholesale stocks with a positive ESP figure. Brinker International (EAT) is another qualifying stock you may want to consider.
Slated to report earnings on August 13, 2025, Brinker International holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is $2.33 a share 97 days from its next quarterly update.
The Zacks Consensus Estimate for Brinker International is $2.24, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of 4.09%.
URBN and EAT's positive ESP figures tell us that both stocks have a good chance at beating analyst expectations in their next earnings report.
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 >>