Quarterly financial reports play a vital role on Wall Street, as they help investors see how a company has performed and what might be coming down the road in the near-term. And out of all of the metrics and results to consider, earnings is one of the most important.

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 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 final step today is to look at a stock that meets our ESP qualifications. Toll Brothers (TOL) earns a Zacks Rank #2 29 days from its next quarterly earnings release on December 3, 2024, and its Most Accurate Estimate comes in at $4.41 a share.

TOL has an Earnings ESP figure of 2.35%, which, as explained above, is calculated by taking the percentage difference between the $4.41 Most Accurate Estimate and the Zacks Consensus Estimate of $4.31.

TOL is just one of a large group of Construction stocks with a positive ESP figure. Lennar (LEN) is another qualifying stock you may want to consider.

Lennar, which is readying to report earnings on December 12, 2024, sits at a Zacks Rank #3 (Hold) right now. It's Most Accurate Estimate is currently $4.27 a share, and LEN is 38 days out from its next earnings report.

The Zacks Consensus Estimate for Lennar is $4.22, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of 1.23%.

TOL and LEN'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 >>