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.
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 Expected Surprise Prediction, or ESP, works by locking in on the most up-to-date analyst earnings revisions because they can be more accurate than estimates from weeks or even months before the actual release date. The thinking is pretty straightforward: analysts who provide earnings estimates closer to the report are likely to have more 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.
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.
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 Rivian Automotive?
The final step today is to look at a stock that meets our ESP qualifications. Rivian Automotive (RIVN) earns a #3 (Hold) 19 days from its next quarterly earnings release on May 6, 2025, and its Most Accurate Estimate comes in at -$0.72 a share.
RIVN has an Earnings ESP figure of +10.16%, which, as explained above, is calculated by taking the percentage difference between the -$0.72 Most Accurate Estimate and the Zacks Consensus Estimate of -$0.80. Rivian Automotive 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.
RIVN is just one of a large group of Auto, Tires and Trucks stocks with a positive ESP figure. Paccar (PCAR) is another qualifying stock you may want to consider.
Paccar is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on April 29, 2025. PCAR's Most Accurate Estimate sits at $1.60 a share 12 days from its next earnings release.
The Zacks Consensus Estimate for Paccar is $1.59, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +0.15%.
Because both stocks hold a positive Earnings ESP, RIVN and PCAR 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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Rivian Automotive, Inc. (RIVN): Free Stock Analysis Report PACCAR Inc. (PCAR): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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