Earnings are arguably the most important single number on a company's quarterly financial report. Wall Street clearly dives into all of the other metrics and management's input, but the EPS figure helps cut through all the noise.

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.

The ability to identify stocks that are likely to top quarterly earnings expectations can be profitable, but it's no simple task. Here at Zacks, our Earnings ESP filter helps make things easier.

The Zacks Earnings ESP, Explained

The Zacks Earnings ESP, or Expected Surprise Prediction, aims to find earnings surprises by focusing on the most recent analyst revisions. The basic premise is that if an analyst reevaluates their earnings estimate ahead of an earnings release, it means they likely have new information that could possibly be more accurate.

Now that we understand the basic idea, let's look at how the Expected Surprise Prediction works. 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.

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 Royal Bank?

The final step today is to look at a stock that meets our ESP qualifications. Royal Bank (RY Quick QuoteRY - Free Report) earns a #3 (Hold) six days from its next quarterly earnings release on May 29, 2025, and its Most Accurate Estimate comes in at $2.29 a share.

Royal Bank's Earnings ESP sits at +1.49%, which, as explained above, is calculated by taking the percentage difference between the $2.29 Most Accurate Estimate and the Zacks Consensus Estimate of $2.25. RY is also part of a large group of stocks that boast a positive ESP. Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they've reported.

RY is one of just a large database of Finance stocks with positive ESPs. Another solid-looking stock is Digital Realty Trust (DLR Quick QuoteDLR - Free Report) .

Digital Realty Trust is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on July 24, 2025. DLR's Most Accurate Estimate sits at $1.74 a share 62 days from its next earnings release.

For Digital Realty Trust, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $1.74 is +0.09%.

Because both stocks hold a positive Earnings ESP, RY and DLR 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 >>