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.

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. Toll Brothers (TOL) holds a Zacks Rank #3 at the moment and its Most Accurate Estimate comes in at $4.41 a share 19 days away from its upcoming earnings release on December 9, 2024.

Toll Brothers' Earnings ESP sits at 2.35%, which, as explained above, is calculated by taking the percentage difference between the $4.41 Most Accurate Estimate and the Zacks Consensus Estimate of $4.31.

TOL is just one of a large group of Construction stocks with a positive ESP figure. Aspen Aerogels (ASPN) is another qualifying stock you may want to consider.

Slated to report earnings on February 10, 2025, Aspen Aerogels holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is $0.08 a share 82 days from its next quarterly update.

The Zacks Consensus Estimate for Aspen Aerogels is $0.08, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of 8.02%.

TOL and ASPN's positive ESP metrics may signal that a positive earnings surprise for both stocks is on the horizon.

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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