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.

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. Stanley Black & Decker (SWK) holds a Zacks Rank #3 at the moment and its Most Accurate Estimate comes in at $0.55 a share 28 days away from its upcoming earnings release on May 2, 2024.

By taking the percentage difference between the $0.55 Most Accurate Estimate and the $0.54 Zacks Consensus Estimate, Stanley Black & Decker has an Earnings ESP of 0.85%.

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

Slated to report earnings on April 25, 2024, Caterpillar holds a #2 (Buy) ranking on the Zacks Rank, and it's Most Accurate Estimate is $5.18 a share 21 days from its next quarterly update.

The Zacks Consensus Estimate for Caterpillar is $5.11, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of 1.29%.

SWK and CAT'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 >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Stanley Black & Decker, Inc. (SWK) : Free Stock Analysis Report

Caterpillar Inc. (CAT) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research