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.
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, 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.
The core of the ESP model is comparing the Most Accurate Estimate to the Zacks Consensus Estimate, where the resulting percentage difference between the two equals the Expected Surprise Prediction. The Zacks Rank is also factored into the ESP metric to better help find companies that appear poised to top their next bottom-line consensus estimate, which will hopefully help lift the stock price.
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 Medpace?
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. Medpace (MEDP) holds a #2 (Buy) at the moment and its Most Accurate Estimate comes in at $3.65 a share 13 days away from its upcoming earnings release on October 22, 2025.
By taking the percentage difference between the $3.65 Most Accurate Estimate and the $3.49 Zacks Consensus Estimate, Medpace has an Earnings ESP of +4.49%. Investors should also know that MEDP 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.
MEDP is just one of a large group of Medical stocks with a positive ESP figure. McKesson (MCK) is another qualifying stock you may want to consider.
McKesson, which is readying to report earnings on November 5, 2025, sits at a Zacks Rank #3 (Hold) right now. Its Most Accurate Estimate is currently $8.95 a share, and MCK is 27 days out from its next earnings report.
McKesson's Earnings ESP figure currently stands at +1.24% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $8.84.
MEDP and MCK'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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Medpace Holdings, Inc. (MEDP): Free Stock Analysis Report McKesson Corporation (MCK): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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