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.

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.

In fact, when we combined a Zacks Rank #3 (Hold) or better and a positive Earnings ESP, stocks produced a positive surprise 70% of the time. Perhaps most importantly, using these parameters has helped produce 28.3% 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 Freeport-McMoRan?

The final step today is to look at a stock that meets our ESP qualifications. Freeport-McMoRan (FCX Quick QuoteFCX - Free Report) earns a #2 (Buy) one day from its next quarterly earnings release on October 27, 2026, and its Most Accurate Estimate comes in at $0.81 a share.

Freeport-McMoRan's Earnings ESP sits at +0.63%, which, as explained above, is calculated by taking the percentage difference between the $0.81 Most Accurate Estimate and the Zacks Consensus Estimate of $0.8. FCX 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.

FCX is one of just a large database of Basic Materials stocks with positive ESPs. Another solid-looking stock is Dow Inc. (DOW Quick QuoteDOW - Free Report) .

Dow Inc., which is readying to report earnings on February 4, 2027, sits at a Zacks Rank #3 (Hold) right now. Its Most Accurate Estimate is currently $0.55 a share, and DOW is 101 days out from its next earnings report.

The Zacks Consensus Estimate for Dow Inc. is $0.50, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +9.25%.

FCX and DOW'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 >>