Quarterly financial reports play a vital role on Wall Street, as they help investors see how a company has performed and what might be coming down the road in the near-term. And out of all of the metrics and results to consider, earnings is one of the most important.

The earnings figure itself is key, of course, but a beat or miss on the bottom line can sometimes be just as, if not more, important. Therefore, investors should consider paying close attention to these earnings surprises, as a big beat can help a stock climb and vice versa.

Now that we know how important earnings and earnings surprises are, it's time to show investors how to take advantage of these events to boost their returns by utilizing the Zacks Earnings ESP filter.

The Zacks Earnings ESP, Explained

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.

With this in mind, the Expected Surprise Prediction compares the Most Accurate Estimate (being the most recent) against the overall Zacks Consensus Estimate. The percentage difference provides the ESP figure. The system also utilizes our core Zacks Rank to provide a stronger system for identifying stocks that might beat their next quarterly earnings estimate and possibly see the stock price climb.

Bringing together a positive earnings ESP alongside a Zacks Rank #3 (Hold) or better has helped stocks report a positive earnings surprise 70% of the time. Furthermore, by using these parameters, investors have seen 28.3% annual returns on average, according to our 10 year backtest.

Stocks with a ranking of #3 (Hold), or 60% of all stocks covered by the Zacks Rank, are expected to perform in-line with the broader market. Stocks with rankings of #2 (Buy) and #1 (Strong Buy), or the top 15% and top 5% of stocks, respectively, should outperform the market; Strong Buy stocks should outperform more than any other rank.

Should You Consider Ralph Lauren?

Now that we understand what the ESP is and how beneficial it can be, let's dive into a stock that currently fits the bill. Ralph Lauren (RL Quick QuoteRL - Free Report) earns a #3 (Hold) right now and its Most Accurate Estimate sits at $2 a share, just 14 days from its upcoming earnings release on May 22, 2025.

By taking the percentage difference between the $2 Most Accurate Estimate and the $1.96 Zacks Consensus Estimate, Ralph Lauren has an Earnings ESP of +2.21%. Investors should also know that RL is one of a large group of stocks with positive ESPs. Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they've reported.

RL is part of a big group of Consumer Discretionary stocks that boast a positive ESP, and investors may want to take a look at Norwegian Cruise Line (NCLH Quick QuoteNCLH - Free Report) as well.

Norwegian Cruise Line is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on July 30, 2025. NCLH's Most Accurate Estimate sits at $0.51 a share 83 days from its next earnings release.

The Zacks Consensus Estimate for Norwegian Cruise Line is $0.51, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +0.49%.

Because both stocks hold a positive Earnings ESP, RL and NCLH could potentially post earnings beats in their next reports.

Find Stocks to Buy or Sell Before They're Reported

Use the Zacks Earnings ESP Filter to turn up stocks with the highest probability of positively, or negatively, surprising to buy or sell before they're reported for profitable earnings season trading. Check it out here >>