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.

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.

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.

Bringing together a positive earnings ESP alongside a Zacks Rank #3 (Hold) or better has helped stocks report a positive earnings surprise 70% of the time. Furthermore, by using these parameters, investors have seen 28.3% 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 Zoetis?

The final step today is to look at a stock that meets our ESP qualifications. Zoetis (ZTS Quick QuoteZTS - Free Report) earns a #3 (Hold) 18 days from its next quarterly earnings release on August 5, 2025, and its Most Accurate Estimate comes in at $1.63 a share.

Zoetis' Earnings ESP sits at +1.10%, which, as explained above, is calculated by taking the percentage difference between the $1.63 Most Accurate Estimate and the Zacks Consensus Estimate of $1.61. ZTS 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.

ZTS is one of just a large database of Medical stocks with positive ESPs. Another solid-looking stock is Exact Sciences (EXAS Quick QuoteEXAS - Free Report) .

Exact Sciences is a Zacks Rank #2 (Buy) stock, and is getting ready to report earnings on August 6, 2025. EXAS' Most Accurate Estimate sits at $0.06 a share 19 days from its next earnings release.

Exact Sciences' Earnings ESP figure currently stands at +475.00% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of -$0.02.

ZTS and EXAS' 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 >>