Two factors often determine stock prices in the long run: earnings and interest rates. Investors can't control the latter, but they can focus on a company's earnings results every quarter.

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 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.

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.

In fact, when we combined a Zacks Rank #3 (Hold) or better and a positive Earnings ESP, stocks produced a positive surprise 70% of the time. Perhaps most importantly, using these parameters has helped produce 28.3% 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 T. Rowe Price?

The final step today is to look at a stock that meets our ESP qualifications. T. Rowe Price (TROW Quick QuoteTROW - Free Report) earns a #2 (Buy) 17 days from its next quarterly earnings release on August 1, 2025, and its Most Accurate Estimate comes in at $2.11 a share.

T. Rowe Price's Earnings ESP sits at +1.43%, which, as explained above, is calculated by taking the percentage difference between the $2.11 Most Accurate Estimate and the Zacks Consensus Estimate of $2.08. TROW 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.

TROW is one of just a large database of Finance stocks with positive ESPs. Another solid-looking stock is Palomar (PLMR Quick QuotePLMR - Free Report) .

Palomar is a Zacks Rank #2 (Buy) stock, and is getting ready to report earnings on August 4, 2025. PLMR's Most Accurate Estimate sits at $1.71 a share 20 days from its next earnings release.

The Zacks Consensus Estimate for Palomar is $1.69, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +0.99%.

TROW and PLMR'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 >>