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.
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 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 Emerson Electric?
The last thing we will do today, now that we have a grasp on the ESP and how powerful of a tool it can be, is to quickly look at a qualifying stock. Emerson Electric (EMR) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at $1.63 a share 29 days away from its upcoming earnings release on November 4, 2025.
Emerson Electric's Earnings ESP sits at +0.72%, which, as explained above, is calculated by taking the percentage difference between the $1.63 Most Accurate Estimate and the Zacks Consensus Estimate of $1.62. EMR is also part of a large group of stocks that boast a positive ESP. Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they've reported.
EMR is one of just a large database of Industrial Products stocks with positive ESPs. Another solid-looking stock is Eaton (ETN).
Slated to report earnings on October 30, 2025, Eaton holds a #3 (Hold) ranking on the Zacks Rank, and its Most Accurate Estimate is $3.07 a share 24 days from its next quarterly update.
Eaton's Earnings ESP figure currently stands at +0.26% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $3.06.
Because both stocks hold a positive Earnings ESP, EMR and ETN 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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Emerson Electric Co. (EMR): Free Stock Analysis Report Eaton Corporation, PLC (ETN): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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