Two factors often determine stock prices in the long run: earnings and interest rates. Investors can't control the latter, but they can focus on a company's earnings results every quarter.

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.

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.

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 Hecla Mining?

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. Hecla Mining (HL Quick QuoteHL - Free Report) holds a #1 (Strong Buy) at the moment and its Most Accurate Estimate comes in at $0.06 a share 27 days away from its upcoming earnings release on February 12, 2025.

Hecla Mining's Earnings ESP sits at +50%, which, as explained above, is calculated by taking the percentage difference between the $0.06 Most Accurate Estimate and the Zacks Consensus Estimate of $0.04. HL 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.

HL is part of a big group of Basic Materials stocks that boast a positive ESP, and investors may want to take a look at B2Gold (BTG Quick QuoteBTG - Free Report) as well.

B2Gold is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on February 19, 2025. BTG's Most Accurate Estimate sits at $0.08 a share 34 days from its next earnings release.

The Zacks Consensus Estimate for B2Gold is $0.07, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +11.63%.

Because both stocks hold a positive Earnings ESP, HL and BTG 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 >>