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.

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, 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.

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.

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.

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 Ally Financial?

The final step today is to look at a stock that meets our ESP qualifications. Ally Financial (ALLY Quick QuoteALLY - Free Report) earns a #3 (Hold) 30 days from its next quarterly earnings release on July 17, 2026, and its Most Accurate Estimate comes in at $1.31 a share.

Ally Financial's Earnings ESP sits at +2.22%, which, as explained above, is calculated by taking the percentage difference between the $1.31 Most Accurate Estimate and the Zacks Consensus Estimate of $1.29. ALLY is also part of a large group of stocks that boast a positive ESP. Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they've reported.

ALLY is one of just a large database of Finance stocks with positive ESPs. Another solid-looking stock is Allstate (ALL Quick QuoteALL - Free Report) .

Allstate is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on July 29, 2026. ALL's Most Accurate Estimate sits at $5.35 a share 42 days from its next earnings release.

The Zacks Consensus Estimate for Allstate is $4.72, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +13.29%.

ALLY and ALL'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 >>