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 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, 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.

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 system also utilizes our core Zacks Rank to provide a stronger system for identifying stocks that might beat their next quarterly earnings estimate and possibly see the stock price climb.

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.

Most stocks, about 60%, fall into the #3 (Hold) category, and they are expected to perform in-line with the broader market. Stocks with a #2 (Buy) and #1 (Strong Buy) rating, or the top 15% and top 5% of stocks, respectively, should outperform the market, with Strong Buy stocks outperforming more than any other rank.

Should You Consider Cardinal Health?

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. Cardinal Health (CAH) earns a #2 (Buy) right now and its Most Accurate Estimate sits at $2.45 a share, just 13 days from its upcoming earnings release on August 11, 2026.

Cardinal Health's Earnings ESP sits at +1.24%, which, as explained above, is calculated by taking the percentage difference between the $2.45 Most Accurate Estimate and the Zacks Consensus Estimate of $2.42. CAH is also part of a large group of stocks that boast a positive ESP. Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they've reported.

CAH is part of a big group of Medical stocks that boast a positive ESP, and investors may want to take a look at Pfizer (PFE) as well.

Slated to report earnings on August 4, 2026, Pfizer holds a #3 (Hold) ranking on the Zacks Rank, and its Most Accurate Estimate is $0.69 a share six days from its next quarterly update.

Pfizer's Earnings ESP figure currently stands at +2.07% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $0.68.

Because both stocks hold a positive Earnings ESP, CAH and PFE could potentially post earnings beats in their next reports.

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 >>

Should You Invest in Cardinal Health, Inc. (CAH)?

Before you invest in Cardinal Health, Inc. (CAH), want to know the best stocks to buy for the next 30 days? Check out Zacks Investment Research for our free report on the 7 best stocks to buy.

Zacks Investment Research has been committed to providing investors with tools and independent research since 1978. For more than a quarter century, the Zacks Rank stock-rating system has more than doubled the S&P 500 with an average gain of +24.08% per year. (These returns cover a period from January 1, 1988 through May 6, 2024.)

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

 

Cardinal Health, Inc. (CAH): Free Stock Analysis Report

 

Pfizer Inc. (PFE): Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research