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.

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.

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.

The core of the ESP model is comparing the Most Accurate Estimate to the Zacks Consensus Estimate, where the resulting percentage difference between the two equals the Expected Surprise Prediction. The Zacks Rank is also factored into the ESP metric to better help find companies that appear poised to top their next bottom-line consensus estimate, which will hopefully help lift the stock price.

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 Wells Fargo?

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. Wells Fargo (WFC Quick QuoteWFC - Free Report) earns a #3 (Hold) right now and its Most Accurate Estimate sits at $1.43 a share, just 28 days from its upcoming earnings release on July 14, 2025.

By taking the percentage difference between the $1.43 Most Accurate Estimate and the $1.41 Zacks Consensus Estimate, Wells Fargo has an Earnings ESP of +1.29%. Investors should also know that WFC 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.

WFC is part of a big group of Finance stocks that boast a positive ESP, and investors may want to take a look at Pebblebrook Hotel (PEB Quick QuotePEB - Free Report) as well.

Pebblebrook Hotel is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on July 23, 2025. PEB's Most Accurate Estimate sits at $0.61 a share 37 days from its next earnings release.

The Zacks Consensus Estimate for Pebblebrook Hotel is $0.59, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +3.1%.

WFC and PEB's positive ESP figures tell us that both stocks have a good chance at beating analyst expectations in their next earnings report.

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 >>