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.
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.
Now that we understand the basic idea, let's look at how the Expected Surprise Prediction works. The ESP is calculated by comparing the Most Accurate Estimate to the Zacks Consensus Estimate, with the percentage difference between the two giving us the Zacks ESP figure.
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 Inspire Medical Systems?
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. Inspire Medical Systems (INSP) earns a #3 (Hold) right now and its Most Accurate Estimate sits at $0.24 a share, just three days from its upcoming earnings release on August 4, 2025.
By taking the percentage difference between the $0.24 Most Accurate Estimate and the $0.22 Zacks Consensus Estimate, Inspire Medical Systems has an Earnings ESP of +9.09%. Investors should also know that INSP is one of a large group 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.
INSP is one of just a large database of Medical stocks with positive ESPs. Another solid-looking stock is Hologic (HOLX).
Slated to report earnings on November 3, 2025, Hologic holds a #3 (Hold) ranking on the Zacks Rank, and its Most Accurate Estimate is $1.11 a share 94 days from its next quarterly update.
Hologic's Earnings ESP figure currently stands at +1.60% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $1.09.
Because both stocks hold a positive Earnings ESP, INSP and HOLX 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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Inspire Medical Systems, Inc. (INSP): Free Stock Analysis Report Hologic, Inc. (HOLX): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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