Two factors often determine stock prices in the long run: earnings and interest rates. Investors can't control the latter, but they can focus on a company's earnings results every quarter.

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.

Bringing together a positive earnings ESP alongside a Zacks Rank #3 (Hold) or better has helped stocks report a positive earnings surprise 70% of the time. Furthermore, by using these parameters, investors have seen 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 Murphy USA?

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. Murphy USA (MUSA Quick QuoteMUSA - Free Report) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at $6.56 a share 22 days away from its upcoming earnings release on February 4, 2026.

By taking the percentage difference between the $6.56 Most Accurate Estimate and the $6.45 Zacks Consensus Estimate, Murphy USA has an Earnings ESP of +1.76%. Investors should also know that MUSA 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.

MUSA is part of a big group of Retail and Wholesale stocks that boast a positive ESP, and investors may want to take a look at American Eagle Outfitters (AEO Quick QuoteAEO - Free Report) as well.

American Eagle Outfitters is a Zacks Rank #1 (Strong Buy) stock, and is getting ready to report earnings on March 11, 2026. AEO's Most Accurate Estimate sits at $0.70 a share 57 days from its next earnings release.

American Eagle Outfitters' Earnings ESP figure currently stands at +4.22% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $0.67.

MUSA and AEO'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 >>