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 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 final step today is to look at a stock that meets our ESP qualifications. Capital Southwest (CSWC) earns a Zacks Rank #2 seven days from its next quarterly earnings release on May 14, 2025, and its Most Accurate Estimate comes in at $0.64 a share.

Capital Southwest's Earnings ESP sits at 3.23%, which, as explained above, is calculated by taking the percentage difference between the $0.64 Most Accurate Estimate and the Zacks Consensus Estimate of $0.62.

CSWC is just one of a large group of Finance stocks with a positive ESP figure. Palomar (PLMR) is another qualifying stock you may want to consider.

Palomar, which is readying to report earnings on August 4, 2025, sits at a Zacks Rank #2 (Buy) right now. It's Most Accurate Estimate is currently $1.73 a share, and PLMR is 89 days out from its next earnings report.

The Zacks Consensus Estimate for Palomar is $1.60, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of 7.9%.

Because both stocks hold a positive Earnings ESP, CSWC and PLMR 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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Capital Southwest Corporation (CSWC):Free Stock Analysis Report

Palomar Holdings, Inc. (PLMR):Free Stock Analysis Report

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

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