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.

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.

The core of the ESP model is comparing the Most Accurate Estimate to the Zacks Consensus Estimate, where the resulting percentage difference between the two equals the Expected Surprise Prediction. The Zacks Rank is also factored into the ESP metric to better help find companies that appear poised to top their next bottom-line consensus estimate, which will hopefully help lift the stock price.

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 Copa Holdings?

The final step today is to look at a stock that meets our ESP qualifications. Copa Holdings (CPA Quick QuoteCPA - Free Report) earns a #3 (Hold) 13 days from its next quarterly earnings release on February 12, 2025, and its Most Accurate Estimate comes in at $4 a share.

By taking the percentage difference between the $4 Most Accurate Estimate and the $3.87 Zacks Consensus Estimate, Copa Holdings has an Earnings ESP of +3.35%. Investors should also know that CPA 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.

CPA is just one of a large group of Transportation stocks with a positive ESP figure. FedEx (FDX Quick QuoteFDX - Free Report) is another qualifying stock you may want to consider.

Slated to report earnings on March 20, 2025, FedEx holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is $4.85 a share 49 days from its next quarterly update.

The Zacks Consensus Estimate for FedEx is $4.59, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +5.75%.

CPA and FDX'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 >>