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.
Now that we understand the basic idea, let's look at how the Expected Surprise Prediction works. The ESP is calculated by comparing the Most Accurate Estimate to the Zacks Consensus Estimate, with the percentage difference between the two giving us the Zacks ESP figure.
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 Enphase Energy?
The final step today is to look at a stock that meets our ESP qualifications. Enphase Energy (ENPH) earns a #3 (Hold) one day from its next quarterly earnings release on April 22, 2025, and its Most Accurate Estimate comes in at $0.75 a share.
By taking the percentage difference between the $0.75 Most Accurate Estimate and the $0.71 Zacks Consensus Estimate, Enphase Energy has an Earnings ESP of +5.53%. Investors should also know that ENPH 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.
ENPH is part of a big group of Oils and Energy stocks that boast a positive ESP, and investors may want to take a look at Enbridge (ENB) as well.
Enbridge is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on May 9, 2025. ENB's Most Accurate Estimate sits at $0.68 a share 18 days from its next earnings release.
For Enbridge, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $0.66 is +4.06%.
ENPH and ENB'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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Enphase Energy, Inc. (ENPH): Free Stock Analysis Report Enbridge Inc (ENB): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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