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.

The earnings figure itself is key, but a beat or miss on the bottom line can sometimes be just as, if not more, important. Therefore, investors should consider paying close attention to these earnings surprises, as a big beat can help a stock climb even higher.

2 Stocks to Add to Your Watchlist

The Zacks Earnings ESP, or Expected Surprise Prediction, aims to find earnings surprises by focusing on the most recent analyst revisions. The basic premise is that if an analyst reevaluates their earnings estimate ahead of an earnings release, it means they likely have new information that could possibly be more accurate. 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 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. MercadoLibre (MELI) holds a Zacks Rank #2 at the moment and its Most Accurate Estimate comes in at $12.56 a share 14 days away from its upcoming earnings release on November 6, 2024.

By taking the percentage difference between the $12.56 Most Accurate Estimate and the $11.27 Zacks Consensus Estimate, MercadoLibre has an Earnings ESP of 11.42%.

MELI is just one of a large group of Retail-Wholesale stocks with a positive ESP figure. McDonald's (MCD) is another qualifying stock you may want to consider.

McDonald's, which is readying to report earnings on October 29, 2024, sits at a Zacks Rank #3 (Hold) right now. It's Most Accurate Estimate is currently $3.19 a share, and MCD is six days out from its next earnings report.

For McDonald's, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $3.17 is 0.54%.

Because both stocks hold a positive Earnings ESP, MELI and MCD 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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