Quarterly financial reports play a vital role on Wall Street, as they help investors see how a company has performed and what might be coming down the road in the near-term. And out of all of the metrics and results to consider, earnings is one of the most important.
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.
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.
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 Novartis?
The final step today is to look at a stock that meets our ESP qualifications. Novartis (NVS) earns a #2 (Buy) six days from its next quarterly earnings release on October 28, 2025, and its Most Accurate Estimate comes in at $2.27 a share.
By taking the percentage difference between the $2.27 Most Accurate Estimate and the $2.26 Zacks Consensus Estimate, Novartis has an Earnings ESP of +0.30%. Investors should also know that NVS 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.
NVS is part of a big group of Medical stocks that boast a positive ESP, and investors may want to take a look at Exact Sciences (EXAS) as well.
Exact Sciences, which is readying to report earnings on November 3, 2025, sits at a Zacks Rank #1 (Strong Buy) right now. Its Most Accurate Estimate is currently $0.15 a share, and EXAS is 12 days out from its next earnings report.
Exact Sciences' Earnings ESP figure currently stands at +56.25% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $0.10.
Because both stocks hold a positive Earnings ESP, NVS and EXAS 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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Novartis AG (NVS): Free Stock Analysis Report Exact Sciences Corporation (EXAS): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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