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.

The earnings figure itself is key, but a beat or miss on the bottom line can sometimes be just as, if not more, important. Therefore, investors should consider paying close attention to these earnings surprises, as a big beat can help a stock climb even higher.

2 Stocks to Add to Your Watchlist

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. Caterpillar (CAT) holds a Zacks Rank #3 at the moment and its Most Accurate Estimate comes in at $5.40 a share 13 days away from its upcoming earnings release on October 30, 2024.

CAT has an Earnings ESP figure of 0.2%, which, as explained above, is calculated by taking the percentage difference between the $5.40 Most Accurate Estimate and the Zacks Consensus Estimate of $5.38.

CAT is just one of a large group of Industrial Products stocks with a positive ESP figure. Cintas (CTAS) is another qualifying stock you may want to consider.

Slated to report earnings on December 19, 2024, Cintas holds a #2 (Buy) ranking on the Zacks Rank, and it's Most Accurate Estimate is $1.01 a share 63 days from its next quarterly update.

For Cintas, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $1.01 is 0.13%.

Because both stocks hold a positive Earnings ESP, CAT and CTAS 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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Caterpillar Inc. (CAT) : Free Stock Analysis Report

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