These 2 Business Services Stocks Could Beat Earnings: Why They Should Be on Your Radar

The article introduces the Zacks Earnings ESP (Expected Surprise Prediction) tool, designed to identify stocks likely to beat quarterly earnings estimates by comparing the Most Accurate Estimate to the Zacks Consensus Estimate. This methodology, when combined with a Zacks Rank of #3 (Hold) or better and a positive ESP, has historically predicted positive earnings surprises 70% of the time, yielding an average annual return of 28.3% over a 10-year backtest. Fidelity National Information Services (FIS) and Gen Digital (GEN) are cited as current examples, both exhibiting positive ESPs (+0.67% and +1.67% respectively), indicating a high probability of exceeding analyst expectations in their upcoming reports.

Analysis

The analysis highlights a quantitative strategy, the Zacks Earnings ESP, which aims to predict positive earnings surprises by identifying recent upward revisions in analyst estimates. According to a 10-year backtest, combining a positive ESP with a Zacks Rank of #3 (Hold) or better has historically resulted in a positive earnings surprise 70% of the time, generating an average annual return of 28.3%. Two business services stocks are identified as currently fitting this model. Fidelity National Information Services (FIS) carries a Zacks Rank #3 (Hold) and a positive ESP of +0.67%, with its Most Accurate Estimate of $1.37 per share slightly above the consensus of $1.36. A more compelling case is presented for Gen Digital (GEN), which holds a superior Zacks Rank #2 (Buy) and a stronger positive ESP of +1.67%, based on a Most Accurate Estimate of $0.61 per share versus a consensus of $0.60. The data suggests that recent analyst sentiment is positive for both companies, positioning them for potential earnings beats in their upcoming reports on August 5 and August 7, 2025, respectively, with GEN showing more favorable quantitative signals.

Key Decisions for Investors

• Investors seeking short-term, catalyst-driven trades could consider positions in companies with a positive Earnings ESP and a strong Zacks Rank, such as Gen Digital, ahead of their earnings reports.
• Gen Digital (GEN) appears to be the stronger candidate of the two for a potential positive post-earnings price reaction, given its superior Zacks Rank #2 (Buy) and a more significant ESP of +1.67%.
• For Fidelity National Information Services (FIS), the #3 (Hold) rating suggests that while an earnings beat is possible, the stock may perform in-line with the market, warranting a more neutral stance or a smaller position size relative to higher-ranked opportunities.
• Traders should remember that an earnings beat does not guarantee a price increase; forward guidance and other qualitative factors from the earnings call will be critical in determining the ultimate market reaction.