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.

2 Stocks to Add to Your Watchlist

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 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 look at a qualifying stock. Nike (NKE) holds a Zacks Rank #3 at the moment and its Most Accurate Estimate comes in at $0.56 a share seven days away from its upcoming earnings release on October 1, 2024.

By taking the percentage difference between the $0.56 Most Accurate Estimate and the $0.51 Zacks Consensus Estimate, Nike has an Earnings ESP of 8.99%.

NKE is just one of a large group of Consumer Discretionary stocks with a positive ESP figure. Peloton (PTON) is another qualifying stock you may want to consider.

Slated to report earnings on November 7, 2024, Peloton holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is -$0.12 a share 44 days from its next quarterly update.

Peloton's Earnings ESP figure currently stands at 23.64% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of -$0.15.

Because both stocks hold a positive Earnings ESP, NKE and PTON 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 >>

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