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, 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.

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.

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 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 American International Group?

The final step today is to look at a stock that meets our ESP qualifications. American International Group (AIG Quick QuoteAIG - Free Report) earns a #2 (Buy) 29 days from its next quarterly earnings release on February 15, 2023, and its Most Accurate Estimate comes in at $1.29 a share.

AIG has an Earnings ESP figure of +13.33%, which, as explained above, is calculated by taking the percentage difference between the $1.29 Most Accurate Estimate and the Zacks Consensus Estimate of $1.14. American International Group is one of a large database 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.

AIG is just one of a large group of Finance stocks with a positive ESP figure. Huntington Bancshares (HBAN Quick QuoteHBAN - Free Report) is another qualifying stock you may want to consider.

Slated to report earnings on January 20, 2023, Huntington Bancshares holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is $0.41 a share three days from its next quarterly update.

For Huntington Bancshares, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $0.41 is +1.92%.

Because both stocks hold a positive Earnings ESP, AIG and HBAN 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 >>