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.

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.

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 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.

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 Stanley Black & Decker?

The final step today is to look at a stock that meets our ESP qualifications. Stanley Black & Decker (SWK Quick QuoteSWK - Free Report) earns a #3 (Hold) 11 days from its next quarterly earnings release on July 29, 2025, and its Most Accurate Estimate comes in at $0.48 a share.

By taking the percentage difference between the $0.48 Most Accurate Estimate and the $0.34 Zacks Consensus Estimate, Stanley Black & Decker has an Earnings ESP of +39.79%. Investors should also know that SWK 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.

SWK is one of just a large database of Industrial Products stocks with positive ESPs. Another solid-looking stock is Eaton (ETN Quick QuoteETN - Free Report) .

Slated to report earnings on August 7, 2025, Eaton holds a #3 (Hold) ranking on the Zacks Rank, and its Most Accurate Estimate is $2.93 a share 20 days from its next quarterly update.

For Eaton, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $2.92 is +0.39%.

SWK and ETN'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 >>