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 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.
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 Ally Financial?
The final step today is to look at a stock that meets our ESP qualifications. Ally Financial (ALLY) earns a #3 (Hold) 16 days from its next quarterly earnings release on October 17, 2025, and its Most Accurate Estimate comes in at $1.03 a share.
By taking the percentage difference between the $1.03 Most Accurate Estimate and the $0.99 Zacks Consensus Estimate, Ally Financial has an Earnings ESP of +4.24%. Investors should also know that ALLY 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.
ALLY is part of a big group of Finance stocks that boast a positive ESP, and investors may want to take a look at Goldman Sachs (GS) as well.
Goldman Sachs, which is readying to report earnings on October 14, 2025, sits at a Zacks Rank #3 (Hold) right now. Its Most Accurate Estimate is currently $11.21 a share, and GS is 13 days out from its next earnings report.
The Zacks Consensus Estimate for Goldman Sachs is $10.58, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +5.91%.
ALLY and GS' positive ESP metrics may signal that a positive earnings surprise for both stocks is on the horizon.
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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Ally Financial Inc. (ALLY): Free Stock Analysis Report The Goldman Sachs Group, Inc. (GS): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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