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

Zacks highlights its Earnings ESP (Expected Surprise Prediction) tool as a robust method for identifying stocks likely to beat earnings estimates, demonstrating a 70% success rate in predicting positive surprises and generating an average annual return of 28.3% over a 10-year backtest when combined with a Zacks Rank #3 or better and a positive ESP. The tool operates by comparing the most accurate analyst estimate to the consensus. Utilities stocks AES (ESP +10.95%) and Xcel Energy (ESP +3.05%) are cited as current examples poised for potential positive earnings surprises ahead of their October 30, 2025, reports.

Analysis

The analysis centers on the Zacks Earnings ESP (Expected Surprise Prediction) model, a quantitative tool designed to forecast earnings beats by tracking the most recent analyst revisions. The model's historical performance is notable, with a reported 70% success rate in predicting positive surprises and generating an average annual return of 28.3% over a 10-year backtest when a positive ESP is combined with a Zacks Rank of #3 (Hold) or better. The article applies this methodology to two utility stocks, AES Corporation (AES) and Xcel Energy (XEL), both with earnings scheduled for October 30, 2025. AES displays a particularly strong signal with a positive Earnings ESP of +10.95%, resulting from its Most Accurate Estimate of $0.77 per share exceeding the Zacks Consensus Estimate of $0.69. Xcel Energy also shows a positive signal, albeit a more moderate one, with an ESP of +3.05% based on a Most Accurate Estimate of $1.39 versus a consensus of $1.34. Despite these bullish short-term indicators, both companies currently hold a Zacks Rank #3 (Hold), suggesting they are expected to perform in line with the broader market, which tempers the otherwise positive outlook derived solely from the ESP metric.

Key Decisions for Investors

• Investors with an event-driven strategy could consider tactical long positions in AES and XEL ahead of their October 30, 2025, earnings releases to potentially capitalize on a positive surprise and subsequent price appreciation.
• Given the significantly higher Earnings ESP of +10.95% for AES compared to +3.05% for XEL, traders seeking a higher-conviction play based on this specific quantitative signal may favor AES.
• It is crucial to note that both stocks have a Zacks Rank of #3 (Hold), indicating an expectation of market-perform returns; therefore, the positive ESP signal should be viewed as a potential short-term catalyst rather than a fundamental change in long-term outlook.