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.
We know earnings results are vital, but how a company performs compared to bottom line expectations can be even more important when it comes to stock prices, especially in the near-term. This means that investors might want to take advantage of these 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 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.
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 system also utilizes our core Zacks Rank to provide a stronger system for identifying stocks that might beat their next quarterly earnings estimate and possibly see the stock price climb.
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.
Stocks with a #3 (Hold) ranking, which is most stocks covered at 60%, are expected to perform in-line with the broader market. But stocks that fall into the #2 (Buy) and #1 (Strong Buy) ranking, or the top 15% and top 5% of stocks, respectively, should outperform the market. Strong Buy stocks should outperform more than any other rank.
Should You Consider Wingstop?
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. Wingstop (WING) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at $0.88 a share 16 days away from its upcoming earnings release on July 30, 2025.
By taking the percentage difference between the $0.88 Most Accurate Estimate and the $0.87 Zacks Consensus Estimate, Wingstop has an Earnings ESP of +1.54%. Investors should also know that WING is one of a large group 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.
WING is part of a big group of Retail and Wholesale stocks that boast a positive ESP, and investors may want to take a look at AutoZone (AZO) as well.
AutoZone is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on September 23, 2025. AZO's Most Accurate Estimate sits at $51.54 a share 71 days from its next earnings release.
AutoZone's Earnings ESP figure currently stands at +0.21% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $51.43.
WING and AZO'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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Wingstop Inc. (WING): Free Stock Analysis Report AutoZone, Inc. (AZO): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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