Why Investors Need to Take Advantage of These 2 Transportation Stocks Now

Zacks Investment Research highlights the potential of using its Earnings ESP (Expected Surprise Prediction) filter to identify stocks likely to beat earnings estimates, noting a 70% positive surprise rate and an average 28.3% annual return based on a 10-year backtest. Delta Air Lines (DAL), with an Earnings ESP of +9.29% and a Zacks Rank #3 (Hold), and Southwest Airlines (LUV), with an Earnings ESP of +5.26% and a Zacks Rank #3 (Hold), are presented as examples of transportation stocks with positive ESP figures that could potentially post earnings beats in their upcoming reports.

Analysis

Zacks Investment Research highlights its proprietary Earnings ESP (Expected Surprise Prediction) methodology as a tool for identifying stocks with a high probability of exceeding earnings expectations, referencing a 10-year backtest where stocks with a Zacks Rank #3 (Hold) or better and a positive ESP delivered a positive earnings surprise 70% of the time and generated average annual returns of 28.3%. This model focuses on the most recent analyst estimate revisions, calculating the ESP as the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate. The article identifies two transportation stocks meeting these criteria: Delta Air Lines (DAL), currently rated Zacks Rank #3 (Hold), has an ESP of +9.29%, with its Most Accurate Estimate at $2.10 per share compared to a Zacks Consensus Estimate of $1.92, ahead of its earnings report scheduled for July 10, 2025. Southwest Airlines (LUV), also a Zacks Rank #3 (Hold), exhibits an ESP of +5.26%, derived from a Most Accurate Estimate of $0.55 per share versus a consensus of $0.52, with its earnings slated for July 24, 2025. According to the article, these positive ESP figures suggest both DAL and LUV have a heightened potential to report earnings above consensus forecasts in their upcoming releases.

Key Decisions for Investors

• Investors may consider the positive Earnings ESP for Delta Air Lines (+9.29%) and Southwest Airlines (+5.26%) as potential leading indicators for earnings beats in their respective upcoming Q2 2025 reports, which could present tactical opportunities.
• While the positive ESPs suggest potential for earnings-driven upside, both DAL and LUV currently hold a Zacks Rank #3 (Hold), indicating they are generally expected to perform in line with the broader market; thus, the ESP signal might be more relevant for event-driven strategies rather than long-term outperformance theses.
• It is advisable to incorporate these ESP signals into a broader due diligence framework, closely monitoring analyst estimate revisions leading up to the July 10, 2025 (DAL) and July 24, 2025 (LUV) earnings announcements, and to align any potential trades with individual risk parameters.