Earnings are arguably the most important single number on a company's quarterly financial report. Wall Street clearly dives into all of the other metrics and management's input, but the EPS figure helps cut through all the noise.
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.
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.
When we join a positive earnings ESP with a Zacks Rank #3 (Hold) or stronger, stocks posted a positive bottom-line surprise 70% of the time. Plus, this system saw investors produce roughly 28% annual returns on average, according to our 10 year backtest.
Stocks with a #3 (Hold) ranking, which is most stocks covered at 60%, are expected to perform in-line with the broader market. But stocks that fall into the #2 (Buy) and #1 (Strong Buy) ranking, 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 Best Buy?
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. Best Buy (BBY) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at $1.37 a share 15 days away from its upcoming earnings release on November 25, 2025.
BBY has an Earnings ESP figure of +4.74%, which, as explained above, is calculated by taking the percentage difference between the $1.37 Most Accurate Estimate and the Zacks Consensus Estimate of $1.31. Best Buy is one of a large database 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.
BBY is just one of a large group of Retail and Wholesale stocks with a positive ESP figure. Urban Outfitters (URBN) is another qualifying stock you may want to consider.
Urban Outfitters is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on November 25, 2025. URBN's Most Accurate Estimate sits at $1.26 a share 15 days from its next earnings release.
For Urban Outfitters, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $1.19 is +6.24%.
BBY and URBN'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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Best Buy Co., Inc. (BBY): Free Stock Analysis Report Urban Outfitters, Inc. (URBN): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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