Two factors often determine stock prices in the long run: earnings and interest rates. Investors can't control the latter, but they can focus on a company's earnings results every quarter.
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.
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 Zacks Rank is also factored into the ESP metric to better help find companies that appear poised to top their next bottom-line consensus estimate, which will hopefully help lift the stock price.
Bringing together a positive earnings ESP alongside a Zacks Rank #3 (Hold) or better has helped stocks report a positive earnings surprise 70% of the time. Furthermore, by using these parameters, investors have seen 28.3% annual returns on average, according to our 10 year backtest.
Stocks with a ranking of #3 (Hold), or 60% of all stocks covered by the Zacks Rank, are expected to perform in-line with the broader market. Stocks with rankings of #2 (Buy) and #1 (Strong Buy), 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 Lam Research?
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. Lam Research (LRCX) holds a #2 (Buy) at the moment and its Most Accurate Estimate comes in at $1.22 a share 13 days away from its upcoming earnings release on July 30, 2025.
LRCX has an Earnings ESP figure of +1.87%, which, as explained above, is calculated by taking the percentage difference between the $1.22 Most Accurate Estimate and the Zacks Consensus Estimate of $1.2. Lam Research 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.
LRCX is just one of a large group of Computer and Technology stocks with a positive ESP figure. ASML (ASML) is another qualifying stock you may want to consider.
Slated to report earnings on October 21, 2025, ASML holds a #3 (Hold) ranking on the Zacks Rank, and its Most Accurate Estimate is $7.42 a share 96 days from its next quarterly update.
ASML's Earnings ESP figure currently stands at +2.77% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $7.22.
Because both stocks hold a positive Earnings ESP, LRCX and ASML 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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Lam Research Corporation (LRCX): Free Stock Analysis Report ASML Holding N.V. (ASML): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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