Wall Street watches a company's quarterly report closely to understand as much as possible about its recent performance and what to expect going forward. Of course, one figure often stands out among the rest: earnings.
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, 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.
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 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 McDonald's?
The final step today is to look at a stock that meets our ESP qualifications. McDonald's (MCD) earns a #3 (Hold) 13 days from its next quarterly earnings release on August 6, 2025, and its Most Accurate Estimate comes in at $3.16 a share.
MCD has an Earnings ESP figure of +0.43%, which, as explained above, is calculated by taking the percentage difference between the $3.16 Most Accurate Estimate and the Zacks Consensus Estimate of $3.15. McDonald's 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.
MCD is one of just a large database of Retail and Wholesale stocks with positive ESPs. Another solid-looking stock is Kroger (KR).
Kroger, which is readying to report earnings on September 11, 2025, sits at a Zacks Rank #3 (Hold) right now. Its Most Accurate Estimate is currently $1.00 a share, and KR is 49 days out from its next earnings report.
Kroger's Earnings ESP figure currently stands at +0.22% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $0.99.
MCD and KR's positive ESP figures tell us that both stocks have a good chance at beating analyst expectations in their next earnings report.
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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McDonald's Corporation (MCD): Free Stock Analysis Report The Kroger Co. (KR): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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