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 Expected Surprise Prediction, or ESP, works by locking in on the most up-to-date analyst earnings revisions because they can be more accurate than estimates from weeks or even months before the actual release date. The thinking is pretty straightforward: analysts who provide earnings estimates closer to the report are likely to have more information.

With this in mind, the Expected Surprise Prediction compares the Most Accurate Estimate (being the most recent) against the overall Zacks Consensus Estimate. The percentage difference provides the ESP figure. The system also utilizes our core Zacks Rank to provide a stronger system for identifying stocks that might beat their next quarterly earnings estimate and possibly see the stock price climb.

When we join a positive earnings ESP with a Zacks Rank #3 (Hold) or stronger, stocks posted a positive bottom-line surprise 70% of the time. Plus, this system saw investors produce roughly 28% 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 IBM?

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. IBM (IBM Quick QuoteIBM - Free Report) earns a #3 (Hold) right now and its Most Accurate Estimate sits at $1.45 a share, just 30 days from its upcoming earnings release on April 23, 2025.

IBM's Earnings ESP sits at +1.7%, which, as explained above, is calculated by taking the percentage difference between the $1.45 Most Accurate Estimate and the Zacks Consensus Estimate of $1.43. IBM 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.

IBM is just one of a large group of Computer and Technology stocks with a positive ESP figure. Jabil (JBL Quick QuoteJBL - Free Report) is another qualifying stock you may want to consider.

Jabil is a Zacks Rank #2 (Buy) stock, and is getting ready to report earnings on June 19, 2025. JBL's Most Accurate Estimate sits at $2.25 a share 87 days from its next earnings release.

For Jabil, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $2.23 is +1.12%.

Because both stocks hold a positive Earnings ESP, IBM and JBL 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 >>