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.

Life and the stock market are both about expectations, and rising above what is expected is often rewarded, while falling short can come with negative consequences. Investors might want to try to capture stronger returns by finding positive earnings surprises.

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.

Stocks with a #3 (Hold) ranking, which is most stocks covered at 60%, are expected to perform in-line with the broader market. But stocks that fall into the #2 (Buy) and #1 (Strong Buy) ranking, 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 Badger Meter?

The final step today is to look at a stock that meets our ESP qualifications. Badger Meter (BMI Quick QuoteBMI - Free Report) earns a #3 (Hold) 18 days from its next quarterly earnings release on July 22, 2025, and its Most Accurate Estimate comes in at $1.21 a share.

By taking the percentage difference between the $1.21 Most Accurate Estimate and the $1.19 Zacks Consensus Estimate, Badger Meter has an Earnings ESP of +1.96%. Investors should also know that BMI 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.

BMI is one of just a large database of Computer and Technology stocks with positive ESPs. Another solid-looking stock is Adobe Systems (ADBE Quick QuoteADBE - Free Report) .

Slated to report earnings on September 11, 2025, Adobe Systems holds a #2 (Buy) ranking on the Zacks Rank, and it's Most Accurate Estimate is $5.17 a share 69 days from its next quarterly update.

Adobe Systems' Earnings ESP figure currently stands at +0.18% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $5.16.

BMI and ADBE'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 >>