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.
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.
Most stocks, about 60%, fall into the #3 (Hold) category, and they are expected to perform in-line with the broader market. Stocks with a #2 (Buy) and #1 (Strong Buy) rating, or the top 15% and top 5% of stocks, respectively, should outperform the market, with Strong Buy stocks outperforming more than any other rank.
Should You Consider Okta?
Now that we understand what the ESP is and how beneficial it can be, let's dive into a stock that currently fits the bill. Okta (OKTA) earns a #1 (Strong Buy) right now and its Most Accurate Estimate sits at $0.88 a share, just 26 days from its upcoming earnings release on August 27, 2025.
OKTA has an Earnings ESP figure of +4.67%, which, as explained above, is calculated by taking the percentage difference between the $0.88 Most Accurate Estimate and the Zacks Consensus Estimate of $0.84. Okta 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.
OKTA is just one of a large group of Computer and Technology stocks with a positive ESP figure. Microsoft (MSFT) is another qualifying stock you may want to consider.
Microsoft is a Zacks Rank #2 (Buy) stock, and is getting ready to report earnings on October 29, 2025. MSFT's Most Accurate Estimate sits at $3.66 a share 89 days from its next earnings release.
The Zacks Consensus Estimate for Microsoft is $3.61, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +1.29%.
Because both stocks hold a positive Earnings ESP, OKTA and MSFT 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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Okta, Inc. (OKTA): Free Stock Analysis Report Microsoft Corporation (MSFT): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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