How to Boost Your Portfolio with Top Business Services Stocks Set to Beat Earnings

The ability to identify stocks that are likely to top quarterly earnings expectations can be profitable, but it's no simple task. Here at Zacks, our Earnings ESP filter helps make things easier.

The Zacks Earnings ESP, Explained

The Zacks Earnings ESP is more formally known as the Expected Surprise Prediction, and it aims to grab the inside track on the latest analyst estimate revisions ahead of a company's report. The idea is relatively intuitive as a newer projection might be based on more complete information.


Now that we understand the basic idea, let's look at how the Expected Surprise Prediction works. The ESP is calculated by comparing the Most Accurate Estimate to the Zacks Consensus Estimate, with the percentage difference between the two giving us the Zacks ESP figure.

Bringing together a positive earnings ESP alongside a Zacks Rank #3 (Hold) or better has helped stocks report a positive earnings surprise 70% of the time. Furthermore, by using these parameters, investors have seen 28.3% annual returns on average, according to our 10 year backtest.

Stocks with a #3 (Hold) ranking, which is most stocks covered at 60%, are expected to perform in-line with the broader market. But stocks that fall into the #2 (Buy) and #1 (Strong Buy) ranking, or the top 15% and top 5% of stocks, respectively, should outperform the market. Strong Buy stocks should outperform more than any other rank.

Should You Consider Hut 8 Mining?

Now that we understand what the ESP is and how beneficial it can be, let's dive into a stock that currently fits the bill. Hut 8 Mining (HUT Quick QuoteHUT - Free Report) earns a #1 (Strong Buy) right now and its Most Accurate Estimate sits at $0.22 a share, just 21 days from its upcoming earnings release on February 10, 2022.

HUT has an Earnings ESP figure of 33.33%, which, as explained above, is calculated by taking the percentage difference between the $0.22 Most Accurate Estimate and the Zacks Consensus Estimate of $0.17. Hut 8 Mining is one of just a large database of stocks with positive ESPs. These stocks can be filtered by ESP, Zacks Rank, % Surprise (Last Qtr.), and Reporting date.

Using the Zacks Earnings ESP to your advantage is just the start. Make sure to check out the Earnings ESP Home Page for even more earnings-related tips and tricks to design a winning investment portfolio.


By Zacks Equity Research