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 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.

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 #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 Valero Energy?

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. Valero Energy (VLO Quick QuoteVLO - Free Report) holds a #1 (Strong Buy) at the moment and its Most Accurate Estimate comes in at $20.69 a share 14 days away from its upcoming earnings release on October 22, 2026.

By taking the percentage difference between the $20.69 Most Accurate Estimate and the $18.15 Zacks Consensus Estimate, Valero Energy has an Earnings ESP of +14.03%. Investors should also know that VLO 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.

VLO is one of just a large database of Oils and Energy stocks with positive ESPs. Another solid-looking stock is EOG Resources (EOG Quick QuoteEOG - Free Report) .

EOG Resources, which is readying to report earnings on November 5, 2026, sits at a Zacks Rank #3 (Hold) right now. Its Most Accurate Estimate is currently $4.24 a share, and EOG is 28 days out from its next earnings report.

For EOG Resources, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $4.21 is +0.76%.

Because both stocks hold a positive Earnings ESP, VLO and EOG could potentially post earnings beats in their next reports.

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 >>