Quarterly financial reports play a vital role on Wall Street, as they help investors see how a company has performed and what might be coming down the road in the near-term. And out of all of the metrics and results to consider, earnings is one of the most important.

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.

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.

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.

Most stocks, about 60%, fall into the #3 (Hold) category, and they are expected to perform in-line with the broader market. Stocks with a #2 (Buy) and #1 (Strong Buy) rating, or the top 15% and top 5% of stocks, respectively, should outperform the market, with Strong Buy stocks outperforming more than any other rank.

Should You Consider Morgan Stanley?

Now that we understand what the ESP is and how beneficial it can be, let's dive into a stock that currently fits the bill. Morgan Stanley (MS Quick QuoteMS - Free Report) earns a #3 (Hold) right now and its Most Accurate Estimate sits at $2.83 a share, just 29 days from its upcoming earnings release on July 15, 2026.

By taking the percentage difference between the $2.83 Most Accurate Estimate and the $2.73 Zacks Consensus Estimate, Morgan Stanley has an Earnings ESP of +3.80%. Investors should also know that MS 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.

MS is one of just a large database of Finance stocks with positive ESPs. Another solid-looking stock is Reinsurance Group (RGA Quick QuoteRGA - Free Report) .

Reinsurance Group is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on July 30, 2026. RGA's Most Accurate Estimate sits at $6.58 a share 44 days from its next earnings release.

For Reinsurance Group, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $6.52 is +0.81%.

MS and RGA'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 >>