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.

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.

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The Zacks Expected Surprise Prediction, or ESP, works by locking in on the most up-to-date analyst earnings revisions because they can be more accurate than estimates from weeks or even months before the actual release date. The thinking is pretty straightforward: analysts who provide earnings estimates closer to the report are likely to have more information. 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 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. Allison Transmission (ALSN) holds a Zacks Rank #2 at the moment and its Most Accurate Estimate comes in at $2.11 a share 27 days away from its upcoming earnings release on February 11, 2025.

By taking the percentage difference between the $2.11 Most Accurate Estimate and the $1.93 Zacks Consensus Estimate, Allison Transmission has an Earnings ESP of 9.33%.

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Allison Transmission Holdings, Inc. (ALSN) : Free Stock Analysis Report

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