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.

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.

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.

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 Organon?

The final step today is to look at a stock that meets our ESP qualifications. Organon (OGN Quick QuoteOGN - Free Report) earns a #2 (Buy) 14 days from its next quarterly earnings release on August 5, 2025, and its Most Accurate Estimate comes in at $0.99 a share.

Organon's Earnings ESP sits at +5.32%, which, as explained above, is calculated by taking the percentage difference between the $0.99 Most Accurate Estimate and the Zacks Consensus Estimate of $0.94. OGN 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.

OGN is just one of a large group of Medical stocks with a positive ESP figure. Recursion Pharmaceuticals (RXRX Quick QuoteRXRX - Free Report) is another qualifying stock you may want to consider.

Recursion Pharmaceuticals is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on August 14, 2025. RXRX's Most Accurate Estimate sits at -$0.34 a share 23 days from its next earnings release.

For Recursion Pharmaceuticals, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of -$0.35 is +2.86%.

OGN and RXRX'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 >>