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 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.

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.

Stocks with a ranking of #3 (Hold), or 60% of all stocks covered by the Zacks Rank, are expected to perform in-line with the broader market. Stocks with rankings of #2 (Buy) and #1 (Strong Buy), 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 Canadian Natural Resources?

The last thing we will do today, now that we have a grasp on the ESP and how powerful of a tool it can be, is to quickly look at a qualifying stock. Canadian Natural Resources (CNQ Quick QuoteCNQ - Free Report) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at $0.47 a share eight days away from its upcoming earnings release on August 7, 2025.

Canadian Natural Resources' Earnings ESP sits at +4.89%, which, as explained above, is calculated by taking the percentage difference between the $0.47 Most Accurate Estimate and the Zacks Consensus Estimate of $0.44. CNQ 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.

CNQ is just one of a large group of Oils and Energy stocks with a positive ESP figure. TC Energy (TRP Quick QuoteTRP - Free Report) is another qualifying stock you may want to consider.

TC Energy is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on July 31, 2025. TRP's Most Accurate Estimate sits at $0.57 a share one day from its next earnings release.

The Zacks Consensus Estimate for TC Energy is $0.56, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +1.49%.

CNQ and TRP'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 >>