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.

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 is more formally known as the Expected Surprise Prediction, and it aims to grab the inside track on the latest analyst estimate revisions ahead of a company's report. The idea is relatively intuitive as a newer projection might be based on more complete information. The ESP is calculated by comparing the Most Accurate Estimate to the Zacks Consensus Estimate, with the percentage difference between the two giving us the Zacks ESP figure.

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. Lululemon (LULU) holds a Zacks Rank #3 at the moment and its Most Accurate Estimate comes in at $2.70 a share seven days away from its upcoming earnings release on December 5, 2024.

LULU has an Earnings ESP figure of 0.45%, which, as explained above, is calculated by taking the percentage difference between the $2.70 Most Accurate Estimate and the Zacks Consensus Estimate of $2.69.

LULU is one of just a large database of Consumer Discretionary stocks with positive ESPs. Another solid-looking stock is Walt Disney (DIS).

Slated to report earnings on February 5, 2025, Walt Disney holds a #2 (Buy) ranking on the Zacks Rank, and it's Most Accurate Estimate is $1.45 a share 69 days from its next quarterly update.

The Zacks Consensus Estimate for Walt Disney is $1.43, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of 1.81%.

Because both stocks hold a positive Earnings ESP, LULU and DIS 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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