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.
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 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.
When we join a positive earnings ESP with a Zacks Rank #3 (Hold) or stronger, stocks posted a positive bottom-line surprise 70% of the time. Plus, this system saw investors produce roughly 28% 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 Nutanix?
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. Nutanix (NTNX) earns a #3 (Hold) right now and its Most Accurate Estimate sits at $0.38 a share, just six days from its upcoming earnings release on August 27, 2025.
By taking the percentage difference between the $0.38 Most Accurate Estimate and the $0.32 Zacks Consensus Estimate, Nutanix has an Earnings ESP of +18.49%. Investors should also know that NTNX 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.
NTNX is just one of a large group of Computer and Technology stocks with a positive ESP figure. Lam Research (LRCX) is another qualifying stock you may want to consider.
Lam Research is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on October 22, 2025. LRCX's Most Accurate Estimate sits at $1.22 a share 62 days from its next earnings release.
The Zacks Consensus Estimate for Lam Research is $1.19, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +2.14%.
Because both stocks hold a positive Earnings ESP, NTNX and LRCX 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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Nutanix (NTNX): Free Stock Analysis Report Lam Research Corporation (LRCX): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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