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.

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.

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.

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 LCI?

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. LCI (LCII Quick QuoteLCII - Free Report) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at $0.76 a share 29 days away from its upcoming earnings release on February 10, 2026.

LCII has an Earnings ESP figure of +10.15%, which, as explained above, is calculated by taking the percentage difference between the $0.76 Most Accurate Estimate and the Zacks Consensus Estimate of $0.69. LCI is one of a large database 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.

LCII is just one of a large group of Auto, Tires and Trucks stocks with a positive ESP figure. General Motors (GM Quick QuoteGM - Free Report) is another qualifying stock you may want to consider.

Slated to report earnings on January 27, 2026, General Motors holds a #1 (Strong Buy) ranking on the Zacks Rank, and its Most Accurate Estimate is $2.54 a share 15 days from its next quarterly update.

The Zacks Consensus Estimate for General Motors is $2.21, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +14.81%.

Because both stocks hold a positive Earnings ESP, LCII and GM 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 >>