Earnings are arguably the most important single number on a company's quarterly financial report. Wall Street clearly dives into all of the other metrics and management's input, but the EPS figure helps cut through all the noise.

The earnings figure itself is key, of course, but a beat or miss on the bottom line can sometimes be just as, if not more, important. Therefore, investors should consider paying close attention to these earnings surprises, as a big beat can help a stock climb and vice versa.

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 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.

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.

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 SPX Technologies?

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. SPX Technologies (SPXC Quick QuoteSPXC - Free Report) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at $2.18 a share seven days away from its upcoming earnings release on October 29, 2026.

By taking the percentage difference between the $2.18 Most Accurate Estimate and the $2.15 Zacks Consensus Estimate, SPX Technologies has an Earnings ESP of +1.26%. Investors should also know that SPXC 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.

SPXC is just one of a large group of Construction stocks with a positive ESP figure. Quanta Services (PWR Quick QuotePWR - Free Report) is another qualifying stock you may want to consider.

Quanta Services, which is readying to report earnings on October 29, 2026, sits at a Zacks Rank #3 (Hold) right now. Its Most Accurate Estimate is currently $5.14 a share, and PWR is seven days out from its next earnings report.

For Quanta Services, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $5.01 is +2.66%.

SPXC and PWR's positive ESP figures tell us that both stocks have a good chance at beating analyst expectations in their next earnings report.

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 >>