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.

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 Expected Surprise Prediction, or ESP, works by locking in on the most up-to-date analyst earnings revisions because they can be more accurate than estimates from weeks or even months before the actual release date. The thinking is pretty straightforward: analysts who provide earnings estimates closer to the report are likely to have more 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.

When we join a positive earnings ESP with a Zacks Rank #3 (Hold) or stronger, stocks posted a positive bottom-line surprise 70% of the time. Plus, this system saw investors produce roughly 28% annual returns on average, according to our 10 year backtest.

Most stocks, about 60%, fall into the #3 (Hold) category, and they are expected to perform in-line with the broader market. Stocks with a #2 (Buy) and #1 (Strong Buy) rating, or the top 15% and top 5% of stocks, respectively, should outperform the market, with Strong Buy stocks outperforming more than any other rank.

Should You Consider Carnival?

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. Carnival (CCL Quick QuoteCCL - Free Report) earns a #3 (Hold) right now and its Most Accurate Estimate sits at $0.25 a share, just 29 days from its upcoming earnings release on June 24, 2025.

CCL has an Earnings ESP figure of +8.42%, which, as explained above, is calculated by taking the percentage difference between the $0.25 Most Accurate Estimate and the Zacks Consensus Estimate of $0.23. Carnival is one of a large database 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.

CCL is just one of a large group of Consumer Discretionary stocks with a positive ESP figure. Warner Bros. Discovery (WBD Quick QuoteWBD - Free Report) is another qualifying stock you may want to consider.

Slated to report earnings on August 6, 2025, Warner Bros. Discovery holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is -$0.16 a share 72 days from its next quarterly update.

Warner Bros. Discovery's Earnings ESP figure currently stands at +4.41% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of -$0.17.

CCL and WBD's positive ESP metrics may signal that a positive earnings surprise for both stocks is on the horizon.

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 >>