Wall Street watches a company's quarterly report closely to understand as much as possible about its recent performance and what to expect going forward. Of course, one figure often stands out among the rest: earnings.

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.

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.

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.

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 Corning?

Now that we understand what the ESP is and how beneficial it can be, let's dive into a stock that currently fits the bill. Corning (GLW Quick QuoteGLW - Free Report) earns a #3 (Hold) right now and its Most Accurate Estimate sits at $0.53 a share, just 28 days from its upcoming earnings release on October 22, 2024.

GLW has an Earnings ESP figure of +1.16%, which, as explained above, is calculated by taking the percentage difference between the $0.53 Most Accurate Estimate and the Zacks Consensus Estimate of $0.52. Corning 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.

GLW is just one of a large group of Computer and Technology stocks with a positive ESP figure. MongoDB (MDB Quick QuoteMDB - Free Report) is another qualifying stock you may want to consider.

Slated to report earnings on December 3, 2024, MongoDB holds a #2 (Buy) ranking on the Zacks Rank, and it's Most Accurate Estimate is $0.69 a share 70 days from its next quarterly update.

For MongoDB, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $0.69 is +0.24%.

GLW and MDB'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 >>