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, 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.
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.
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 eBay?
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. eBay (EBAY) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at $1.34 a share one day away from its upcoming earnings release on July 30, 2025.
eBay's Earnings ESP sits at +2.84%, which, as explained above, is calculated by taking the percentage difference between the $1.34 Most Accurate Estimate and the Zacks Consensus Estimate of $1.3. EBAY is also part of a large group of stocks that boast a positive ESP. Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they've reported.
EBAY is just one of a large group of Retail and Wholesale stocks with a positive ESP figure. Carvana (CVNA) is another qualifying stock you may want to consider.
Carvana is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on July 30, 2025. CVNA's Most Accurate Estimate sits at $1.14 a share one day from its next earnings release.
The Zacks Consensus Estimate for Carvana is $1.10, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +3.74%.
EBAY and CVNA'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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eBay Inc. (EBAY): Free Stock Analysis Report Carvana Co. (CVNA): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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