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.

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.

Now that we understand the basic idea, let's look at how the Expected Surprise Prediction works. The ESP is calculated by comparing the Most Accurate Estimate to the Zacks Consensus Estimate, with the percentage difference between the two giving us the Zacks ESP figure.

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 ranking of #3 (Hold), or 60% of all stocks covered by the Zacks Rank, are expected to perform in-line with the broader market. Stocks with rankings of #2 (Buy) and #1 (Strong Buy), 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 Texas Instruments?

The final step today is to look at a stock that meets our ESP qualifications. Texas Instruments (TXN Quick QuoteTXN - Free Report) earns a #2 (Buy) five days from its next quarterly earnings release on October 21, 2026, and its Most Accurate Estimate comes in at $2.42 a share.

Texas Instruments' Earnings ESP sits at +1.81%, which, as explained above, is calculated by taking the percentage difference between the $2.42 Most Accurate Estimate and the Zacks Consensus Estimate of $2.38. TXN 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.

TXN is just one of a large group of Computer and Technology stocks with a positive ESP figure. Microchip Technology (MCHP Quick QuoteMCHP - Free Report) is another qualifying stock you may want to consider.

Slated to report earnings on November 5, 2026, Microchip Technology holds a #3 (Hold) ranking on the Zacks Rank, and its Most Accurate Estimate is $0.97 a share 20 days from its next quarterly update.

For Microchip Technology, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $0.94 is +3.31%.

TXN and MCHP'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 >>