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.
Bringing together a positive earnings ESP alongside a Zacks Rank #3 (Hold) or better has helped stocks report a positive earnings surprise 70% of the time. Furthermore, by using these parameters, investors have seen 28.3% annual returns on average, according to our 10 year backtest.
Stocks with a ranking of #3 (Hold), or 60% of all stocks covered by the Zacks Rank, are expected to perform in-line with the broader market. Stocks with rankings of #2 (Buy) and #1 (Strong Buy), 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 Parker-Hannifin?
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. Parker-Hannifin (PH) earns a #3 (Hold) right now and its Most Accurate Estimate sits at $6.84 a share, just 29 days from its upcoming earnings release on May 1, 2025.
By taking the percentage difference between the $6.84 Most Accurate Estimate and the $6.73 Zacks Consensus Estimate, Parker-Hannifin has an Earnings ESP of +1.74%. Investors should also know that PH 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.
PH is part of a big group of Industrial Products stocks that boast a positive ESP, and investors may want to take a look at Plug Power (PLUG) as well.
Plug Power is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on May 8, 2025. PLUG's Most Accurate Estimate sits at -$0.20 a share 36 days from its next earnings release.
Plug Power's Earnings ESP figure currently stands at +0.22% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of -$0.20.
PH and PLUG's positive ESP figures tell us that both stocks have a good chance at beating analyst expectations in their next earnings report.
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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Parker-Hannifin Corporation (PH): Free Stock Analysis Report Plug Power, Inc. (PLUG): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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