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.

Life and the stock market are both about expectations, and rising above what is expected is often rewarded, while falling short can come with negative consequences. Investors might want to try to capture stronger returns by finding positive earnings surprises.

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. American Electric Power (AEP) holds a Zacks Rank #3 at the moment and its Most Accurate Estimate comes in at $1.25 a share 28 days away from its upcoming earnings release on February 13, 2025.

American Electric Power's Earnings ESP sits at 0.6%, which, as explained above, is calculated by taking the percentage difference between the $1.25 Most Accurate Estimate and the Zacks Consensus Estimate of $1.24.

AEP is just one of a large group of Utilities stocks with a positive ESP figure. NextEra Energy (NEE) is another qualifying stock you may want to consider.

NextEra Energy is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on January 24, 2025. NEE's Most Accurate Estimate sits at $0.53 a share eight days from its next earnings release.

The Zacks Consensus Estimate for NextEra Energy is $0.51, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of 4.43%.

Because both stocks hold a positive Earnings ESP, AEP and NEE 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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