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.
Hunting for ‘earnings whispers’ or companies poised to beat their quarterly earnings estimates is a somewhat common practice. But that doesn’t make it easy. One way that has been proven to work is by using the Zacks Earnings ESP tool.
The Zacks Earnings ESP, Explained
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.
Now that we understand the basic idea, let’s look at how the Expected Surprise Prediction works. 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.
In fact, when we combined a Zacks Rank #3 (Hold) or better and a positive Earnings ESP, stocks produced a positive surprise 70% of the time. Perhaps most importantly, using these parameters has helped produce 28.3% annual returns on average, according to our 10 year backtest.
Most stocks, about 60%, fall into the #3 (Hold) category, and they are expected to perform in-line with the broader market. Stocks with a #2 (Buy) and #1 (Strong Buy) rating, or the top 15% and top 5% of stocks, respectively, should outperform the market, with Strong Buy stocks outperforming more than any other rank.
Should You Consider United Therapeutics?
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 quickly look at a qualifying stock. United Therapeutics (UTHR – Free Report) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at $6.48 a share 26 days away from its upcoming earnings release on May 7, 2025.
UTHR has an Earnings ESP figure of +3.07%, which, as explained above, is calculated by taking the percentage difference between the $6.48 Most Accurate Estimate and the Zacks Consensus Estimate of $6.29. United Therapeutics is one of a large database of stocks with positive ESPs. Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they’ve reported.
UTHR is one of just a large database of Medical stocks with positive ESPs. Another solid-looking stock is Veeva Systems (VEEV – Free Report) .
Veeva Systems is a Zacks Rank #1 (Strong Buy) stock, and is getting ready to report earnings on May 29, 2025. VEEV’s Most Accurate Estimate sits at $1.75 a share 48 days from its next earnings release.
Veeva Systems’ Earnings ESP figure currently stands at +0.17% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $1.74.
UTHR and VEEV’s positive ESP metrics may signal that a positive earnings surprise for both stocks is on the horizon.
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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