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.

We know earnings results are vital, but how a company performs compared to bottom line expectations can be even more important when it comes to stock prices, especially in the near-term. This means that investors might want to take advantage of these 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 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.

With this in mind, the Expected Surprise Prediction compares the Most Accurate Estimate (being the most recent) against the overall Zacks Consensus Estimate. The percentage difference provides the ESP figure. The system also utilizes our core Zacks Rank to provide a stronger system for identifying stocks that might beat their next quarterly earnings estimate and possibly see the stock price climb.

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 IBM?

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. IBM (IBM Quick QuoteIBM - Free Report) earns a #2 (Buy) right now and its Most Accurate Estimate sits at $3.06 a share, just 28 days from its upcoming earnings release on July 22, 2026.

By taking the percentage difference between the $3.06 Most Accurate Estimate and the $2.96 Zacks Consensus Estimate, IBM has an Earnings ESP of +3.53%. Investors should also know that IBM 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.

IBM is just one of a large group of Computer and Technology stocks with a positive ESP figure. Western Digital (WDC Quick QuoteWDC - Free Report) is another qualifying stock you may want to consider.

Slated to report earnings on July 29, 2026, Western Digital holds a #1 (Strong Buy) ranking on the Zacks Rank, and its Most Accurate Estimate is $3.53 a share 35 days from its next quarterly update.

The Zacks Consensus Estimate for Western Digital is $3.32, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +6.20%.

IBM and WDC'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 >>