Two factors often determine stock prices in the long run: earnings and interest rates. Investors can't control the latter, but they can focus on a company's earnings results every quarter.

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 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. Dollar Tree (DLTR) holds a Zacks Rank #3 at the moment and its Most Accurate Estimate comes in at $2.29 a share seven days away from its upcoming earnings release on March 12, 2025.

Dollar Tree's Earnings ESP sits at 3.99%, which, as explained above, is calculated by taking the percentage difference between the $2.29 Most Accurate Estimate and the Zacks Consensus Estimate of $2.20.

DLTR is part of a big group of Retail-Wholesale stocks that boast a positive ESP, and investors may want to take a look at Costco (COST) as well.

Costco is a Zacks Rank #2 (Buy) stock, and is getting ready to report earnings on March 6, 2025. COST's Most Accurate Estimate sits at $4.09 a share one day from its next earnings release.

Costco's Earnings ESP figure currently stands at 0.14% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $4.09.

DLTR and COST's positive ESP figures tell us that both stocks have a good chance at beating analyst expectations in their next earnings report.

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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Dollar Tree, Inc. (DLTR) : Free Stock Analysis Report

Costco Wholesale Corporation (COST) : Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

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