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.

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 Earnings ESP, or Expected Surprise Prediction, aims to find earnings surprises by focusing on the most recent analyst revisions. The basic premise is that if an analyst reevaluates their earnings estimate ahead of an earnings release, it means they likely have new information that could possibly be more accurate.

Now that we understand the basic idea, let's look at how the Expected Surprise Prediction works. The ESP is calculated by comparing the Most Accurate Estimate to the Zacks Consensus Estimate, with the percentage difference between the two giving us the Zacks ESP figure.

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.

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 CVS Health?

The final step today is to look at a stock that meets our ESP qualifications. CVS Health (CVS Quick QuoteCVS - Free Report) earns a #2 (Buy) seven days from its next quarterly earnings release on July 31, 2025, and its Most Accurate Estimate comes in at $1.50 a share.

By taking the percentage difference between the $1.50 Most Accurate Estimate and the $1.47 Zacks Consensus Estimate, CVS Health has an Earnings ESP of +2.06%. Investors should also know that CVS 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.

CVS is one of just a large database of Medical stocks with positive ESPs. Another solid-looking stock is Tenet Healthcare (THC Quick QuoteTHC - Free Report) .

Tenet Healthcare, which is readying to report earnings on November 4, 2025, sits at a Zacks Rank #3 (Hold) right now. Its Most Accurate Estimate is currently $3.20 a share, and THC is 103 days out from its next earnings report.

Tenet Healthcare's Earnings ESP figure currently stands at +20.87% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $2.64.

CVS and THC'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 >>