Want Better Returns? Don?t Ignore These 2 Finance Stocks Set to Beat Earnings

Zacks Investment Research highlights the Earnings ESP (Expected Surprise Prediction) filter, which identifies stocks with the potential to beat earnings expectations by focusing on analyst revisions. This filter, combining a positive Earnings ESP with a Zacks Rank #3 (Hold) or better, has historically resulted in positive earnings surprises 70% of the time and an average annual return of 28.3% over a 10-year backtest. Royal Bank (RY) and Digital Realty Trust (DLR), both with a Zacks Rank #3 and positive Earnings ESPs of +1.49% and +0.09% respectively, are identified as potential candidates for upcoming earnings beats.

Analysis

The Zacks Earnings ESP (Expected Surprise Prediction) model offers a quantitative methodology for identifying stocks with a higher probability of exceeding quarterly earnings expectations by focusing on the most recent analyst estimate revisions. Historically, combining a positive Earnings ESP with a Zacks Rank #3 (Hold) or better has resulted in positive earnings surprises 70% of the time, accompanied by an average annual return of 28.3% over a 10-year backtest, suggesting its potential as a tool for capturing alpha around earnings events. Specifically, Royal Bank (RY), holding a Zacks Rank #3, currently exhibits a +1.49% Earnings ESP, with its Most Accurate Estimate at $2.29 per share compared to the Zacks Consensus Estimate of $2.25, ahead of its earnings release on May 29, 2025. Similarly, Digital Realty Trust (DLR), also a Zacks Rank #3 stock, shows a +0.09% ESP with its Most Accurate Estimate and Zacks Consensus Estimate both at $1.74 per share, with its earnings scheduled for July 24, 2025. These metrics position both RY and DLR as candidates for potential earnings beats in their upcoming reports. The underlying Zacks Rank system also claims a significant historical outperformance, citing an average annual gain of +24.08% since 1988, more than doubling the S&P 500. The overall sentiment surrounding this analytical approach and the highlighted tickers is strongly positive, according to the provided signals.

Key Decisions for Investors

• Investors may consider Royal Bank (RY) and Digital Realty Trust (DLR) for potential short-term tactical allocations ahead of their respective earnings announcements, given their positive Earnings ESPs which indicate a higher likelihood of beating consensus estimates.
• While the Zacks Rank #3 (Hold) for both RY and DLR suggests an expectation of in-line market performance, a positive earnings surprise driven by the ESP factors could serve as a near-term catalyst for stock price appreciation.
• Utilizing the Zacks Earnings ESP Filter to systematically identify other stocks meeting these criteria could be a strategy for capturing earnings-related alpha, though investors should remain mindful that historical performance and predictive models do not guarantee future results.