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 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 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 Powell Industries?

The final step today is to look at a stock that meets our ESP qualifications. Powell Industries (POWL Quick QuotePOWL - Free Report) earns a #2 (Buy) 28 days from its next quarterly earnings release on May 5, 2026, and its Most Accurate Estimate comes in at $1.35 a share.

POWL has an Earnings ESP figure of +4.77%, which, as explained above, is calculated by taking the percentage difference between the $1.35 Most Accurate Estimate and the Zacks Consensus Estimate of $1.29. Powell Industries 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.

POWL is just one of a large group of Industrial Products stocks with a positive ESP figure. Parker-Hannifin (PH Quick QuotePH - Free Report) is another qualifying stock you may want to consider.

Parker-Hannifin, which is readying to report earnings on May 7, 2026, sits at a Zacks Rank #2 (Buy) right now. Its Most Accurate Estimate is currently $7.87 a share, and PH is 30 days out from its next earnings report.

For Parker-Hannifin, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $7.81 is +0.81%.

POWL and PH's positive ESP metrics may signal that a positive earnings surprise for both stocks is on the horizon.

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 >>