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. TransDigm Group (TDG) holds a Zacks Rank #3 at the moment and its Most Accurate Estimate comes in at $7.64 a share four days away from its upcoming earnings release on February 4, 2025.

TransDigm Group's Earnings ESP sits at 2.1%, which, as explained above, is calculated by taking the percentage difference between the $7.64 Most Accurate Estimate and the Zacks Consensus Estimate of $7.48.

TDG is just one of a large group of Aerospace stocks with a positive ESP figure. General Dynamics (GD) is another qualifying stock you may want to consider.

General Dynamics is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on April 23, 2025. GD's Most Accurate Estimate sits at $3.46 a share 82 days from its next earnings release.

General Dynamics' Earnings ESP figure currently stands at 1.62% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $3.40.

Because both stocks hold a positive Earnings ESP, TDG and GD 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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Transdigm Group Incorporated (TDG) : Free Stock Analysis Report

General Dynamics Corporation (GD) : Free Stock Analysis Report

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