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.

Life and the stock market are both about expectations, and rising above what is expected is often rewarded, while falling short can come with negative consequences. Investors might want to try to capture stronger returns by finding positive 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.

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 Xcel Energy?

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. Xcel Energy (XEL Quick QuoteXEL - Free Report) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at $1.34 a share 10 days away from its upcoming earnings release on October 30, 2025.

Xcel Energy's Earnings ESP sits at +0.68%, which, as explained above, is calculated by taking the percentage difference between the $1.34 Most Accurate Estimate and the Zacks Consensus Estimate of $1.33. XEL 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.

XEL is just one of a large group of Utilities stocks with a positive ESP figure. NRG Energy (NRG Quick QuoteNRG - Free Report) is another qualifying stock you may want to consider.

NRG Energy is a Zacks Rank #1 (Strong Buy) stock, and is getting ready to report earnings on November 6, 2025. NRG's Most Accurate Estimate sits at $2.03 a share 17 days from its next earnings release.

For NRG Energy, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $1.93 is +5.18%.

Because both stocks hold a positive Earnings ESP, XEL and NRG could potentially post earnings beats in their next reports.

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 >>