Wall Street watches a company's quarterly report closely to understand as much as possible about its recent performance and what to expect going forward. Of course, one figure often stands out among the rest: earnings.
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.
Bringing together a positive earnings ESP alongside a Zacks Rank #3 (Hold) or better has helped stocks report a positive earnings surprise 70% of the time. Furthermore, by using these parameters, investors have seen 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 Coherent?
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. Coherent (COHR) earns a #3 (Hold) right now and its Most Accurate Estimate sits at $1.23 a share, just 12 days from its upcoming earnings release on February 4, 2026.
By taking the percentage difference between the $1.23 Most Accurate Estimate and the $1.22 Zacks Consensus Estimate, Coherent has an Earnings ESP of +1.03%. Investors should also know that COHR 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.
COHR is part of a big group of Business Services stocks that boast a positive ESP, and investors may want to take a look at Western Union (WU) as well.
Slated to report earnings on February 3, 2026, Western Union holds a #3 (Hold) ranking on the Zacks Rank, and its Most Accurate Estimate is $0.44 a share 11 days from its next quarterly update.
The Zacks Consensus Estimate for Western Union is $0.43, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +1.51%.
COHR and WU'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 >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Coherent Corp. (COHR): Free Stock Analysis Report The Western Union Company (WU): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
Zacks Investment Research
