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.
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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. Badger Meter (BMI) holds a Zacks Rank #3 at the moment and its Most Accurate Estimate comes in at $1.26 a share 30 days away from its upcoming earnings release on July 18, 2025.
Badger Meter’s Earnings ESP sits at 6.33%, which, as explained above, is calculated by taking the percentage difference between the $1.26 Most Accurate Estimate and the Zacks Consensus Estimate of $1.19.
BMI is one of just a large database of Computer and Technology stocks with positive ESPs. Another solid-looking stock is Cloudflare (NET).
Cloudflare, which is readying to report earnings on August 7, 2025, sits at a Zacks Rank #3 (Hold) right now. It’s Most Accurate Estimate is currently $0.19 a share, and NET is 50 days out from its next earnings report.
The Zacks Consensus Estimate for Cloudflare is $0.18, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of 3.98%.
Because both stocks hold a positive Earnings ESP, BMI and NET 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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