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.

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 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.

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 #3 (Hold) ranking, which is most stocks covered at 60%, are expected to perform in-line with the broader market. But stocks that fall into the #2 (Buy) and #1 (Strong Buy) ranking, 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 Reliance?

The final step today is to look at a stock that meets our ESP qualifications. Reliance (RS Quick QuoteRS - Free Report) earns a #1 (Strong Buy) 29 days from its next quarterly earnings release on October 21, 2026, and its Most Accurate Estimate comes in at $6.97 a share.

Reliance's Earnings ESP sits at +3.26%, which, as explained above, is calculated by taking the percentage difference between the $6.97 Most Accurate Estimate and the Zacks Consensus Estimate of $6.75. RS 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.

RS is one of just a large database of Basic Materials stocks with positive ESPs. Another solid-looking stock is Lithium Americas Corp. (LAC Quick QuoteLAC - Free Report) .

Lithium Americas Corp. is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on November 12, 2026. LAC's Most Accurate Estimate sits at -$0.02 a share 51 days from its next earnings release.

The Zacks Consensus Estimate for Lithium Americas Corp. is -$0.03, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +35.24%.

RS and LAC'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 >>