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.

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.

The ability to identify stocks that are likely to top quarterly earnings expectations can be profitable, but it's no simple task. Here at Zacks, our Earnings ESP filter helps make things easier.

The Zacks Earnings ESP, Explained

The Zacks Expected Surprise Prediction, or ESP, works by locking in on the most up-to-date analyst earnings revisions because they can be more accurate than estimates from weeks or even months before the actual release date. The thinking is pretty straightforward: analysts who provide earnings estimates closer to the report are likely to have more 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.

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 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 Booking Holdings?

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. Booking Holdings (BKNG Quick QuoteBKNG - Free Report) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at $1.15 a share 18 days away from its upcoming earnings release on April 28, 2026.

By taking the percentage difference between the $1.15 Most Accurate Estimate and the $1.11 Zacks Consensus Estimate, Booking Holdings has an Earnings ESP of +3.50%. Investors should also know that BKNG 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.

BKNG is just one of a large group of Retail and Wholesale stocks with a positive ESP figure. Costco (COST Quick QuoteCOST - Free Report) is another qualifying stock you may want to consider.

Costco is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on June 4, 2026. COST's Most Accurate Estimate sits at $4.97 a share 55 days from its next earnings release.

Costco's Earnings ESP figure currently stands at +1.62% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $4.89.

BKNG and COST'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 >>