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.

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.

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 Comcast?

The final step today is to look at a stock that meets our ESP qualifications. Comcast (CMCSA Quick QuoteCMCSA - Free Report) earns a #3 (Hold) 13 days from its next quarterly earnings release on January 30, 2025, and its Most Accurate Estimate comes in at $0.89 a share.

By taking the percentage difference between the $0.89 Most Accurate Estimate and the $0.88 Zacks Consensus Estimate, Comcast has an Earnings ESP of +1.68%. Investors should also know that CMCSA 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.

CMCSA is one of just a large database of Consumer Discretionary stocks with positive ESPs. Another solid-looking stock is Legget & Platt (LEG Quick QuoteLEG - Free Report) .

Legget & Platt, which is readying to report earnings on February 13, 2025, sits at a Zacks Rank #2 (Buy) right now. It's Most Accurate Estimate is currently $0.24 a share, and LEG is 27 days out from its next earnings report.

The Zacks Consensus Estimate for Legget & Platt is $0.21, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +12.94%.

CMCSA and LEG'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 >>