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 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.

Now that we understand what the ESP is and how beneficial it can be, let's dive into a stock that currently fits the bill. Align Technology (ALGN) earns a Zacks Rank #3 right now and its Most Accurate Estimate sits at $2.47 a share, just 15 days from its upcoming earnings release on February 5, 2025.

ALGN has an Earnings ESP figure of 1.23%, which, as explained above, is calculated by taking the percentage difference between the $2.47 Most Accurate Estimate and the Zacks Consensus Estimate of $2.44.

ALGN is one of just a large database of Medical stocks with positive ESPs. Another solid-looking stock is Johnson & Johnson (JNJ) .

Slated to report earnings on January 22, 2025, Johnson & Johnson holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is $2.07 a share one day from its next quarterly update.

The Zacks Consensus Estimate for Johnson & Johnson is $2, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of 3.54%.

ALGN and JNJ'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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