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 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.
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.
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 Morgan Stanley?
Now that we understand what the ESP is and how beneficial it can be, let's dive into a stock that currently fits the bill. Morgan Stanley (MS) earns a #1 (Strong Buy) right now and its Most Accurate Estimate sits at $2.36 a share, just 27 days from its upcoming earnings release on January 15, 2026.
By taking the percentage difference between the $2.36 Most Accurate Estimate and the $2.31 Zacks Consensus Estimate, Morgan Stanley has an Earnings ESP of +2.11%. Investors should also know that MS 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.
MS is one of just a large database of Finance stocks with positive ESPs. Another solid-looking stock is Chubb (CB).
Slated to report earnings on January 27, 2026, Chubb holds a #3 (Hold) ranking on the Zacks Rank, and its Most Accurate Estimate is $6.67 a share 39 days from its next quarterly update.
The Zacks Consensus Estimate for Chubb is $6.33, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +5.40%.
Because both stocks hold a positive Earnings ESP, MS and CB 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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Morgan Stanley (MS): Free Stock Analysis Report Chubb Limited (CB): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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