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.
The earnings figure itself is key, of course, but a beat or miss on the bottom line can sometimes be just as, if not more, important. Therefore, investors should consider paying close attention to these earnings surprises, as a big beat can help a stock climb and vice versa.
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 NRG Energy?
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. NRG Energy (NRG) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at $1.15 a share 30 days away from its upcoming earnings release on August 14, 2025.
NRG has an Earnings ESP figure of +7.98%, which, as explained above, is calculated by taking the percentage difference between the $1.15 Most Accurate Estimate and the Zacks Consensus Estimate of $1.07. NRG Energy 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.
NRG is part of a big group of Utilities stocks that boast a positive ESP, and investors may want to take a look at NextEra Energy (NEE) as well.
NextEra Energy, which is readying to report earnings on July 23, 2025, sits at a Zacks Rank #3 (Hold) right now. Its Most Accurate Estimate is currently $1.03 a share, and NEE is eight days out from its next earnings report.
The Zacks Consensus Estimate for NextEra Energy is $1.01, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +1.98%.
Because both stocks hold a positive Earnings ESP, NRG and NEE 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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NRG Energy, Inc. (NRG): Free Stock Analysis Report NextEra Energy, Inc. (NEE): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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