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.
Life and the stock market are both about expectations, and rising above what is expected is often rewarded, while falling short can come with negative consequences. Investors might want to try to capture stronger returns by finding positive 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 #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 Affirm Holdings?
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. Affirm Holdings (AFRM) earns a #3 (Hold) right now and its Most Accurate Estimate sits at $0.13 a share, just 10 days from its upcoming earnings release on August 28, 2025.
By taking the percentage difference between the $0.13 Most Accurate Estimate and the $0.11 Zacks Consensus Estimate, Affirm Holdings has an Earnings ESP of +19.25%. Investors should also know that AFRM 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.
AFRM is one of just a large database of Computer and Technology stocks with positive ESPs. Another solid-looking stock is Toast (TOST).
Toast, which is readying to report earnings on November 6, 2025, sits at a Zacks Rank #3 (Hold) right now. Its Most Accurate Estimate is currently $0.26 a share, and TOST is 80 days out from its next earnings report.
The Zacks Consensus Estimate for Toast is $0.25, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +4.84%.
Because both stocks hold a positive Earnings ESP, AFRM and TOST 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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Affirm Holdings, Inc. (AFRM): Free Stock Analysis Report Toast, Inc. (TOST): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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