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.

We know earnings results are vital, but how a company performs compared to bottom line expectations can be even more important when it comes to stock prices, especially in the near-term. This means that investors might want to take advantage of these earnings surprises.

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The Zacks Earnings ESP is more formally known as the Expected Surprise Prediction, and it aims to grab the inside track on the latest analyst estimate revisions ahead of a company's report. The idea is relatively intuitive as a newer projection might be based on more complete information. The ESP is calculated by comparing the Most Accurate Estimate to the Zacks Consensus Estimate, with the percentage difference between the two giving us the Zacks ESP figure.

The last thing we will do today, now that we have a grasp on the ESP and how powerful of a tool it can be, is to look at a qualifying stock. Cummins (CMI) holds a Zacks Rank #3 at the moment and its Most Accurate Estimate comes in at $4.98 a share 30 days away from its upcoming earnings release on November 7, 2024.

Cummins' Earnings ESP sits at 2.21%, which, as explained above, is calculated by taking the percentage difference between the $4.98 Most Accurate Estimate and the Zacks Consensus Estimate of $4.87.

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Cummins Inc. (CMI) : Free Stock Analysis Report

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