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.

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.

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.

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 Affirm Holdings?

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. Affirm Holdings (AFRM Quick QuoteAFRM - Free Report) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at $0.39 a share 24 days away from its upcoming earnings release on November 5, 2026.

AFRM has an Earnings ESP figure of +11.03%, which, as explained above, is calculated by taking the percentage difference between the $0.39 Most Accurate Estimate and the Zacks Consensus Estimate of $0.35. Affirm Holdings is one of a large database 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.

AFRM is just one of a large group of Computer and Technology stocks with a positive ESP figure. Cadence Design Systems (CDNS Quick QuoteCDNS - Free Report) is another qualifying stock you may want to consider.

Cadence Design Systems, which is readying to report earnings on October 26, 2026, sits at a Zacks Rank #2 (Buy) right now. Its Most Accurate Estimate is currently $2.05 a share, and CDNS is 14 days out from its next earnings report.

For Cadence Design Systems, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $2.04 is +0.56%.

Because both stocks hold a positive Earnings ESP, AFRM and CDNS 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 >>