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, 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.
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.
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.
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 Alpha and Omega Semiconductor?
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. Alpha and Omega Semiconductor (AOSL) holds a #2 (Buy) at the moment and its Most Accurate Estimate comes in at -$0.03 a share eight days away from its upcoming earnings release on February 5, 2026.
AOSL has an Earnings ESP figure of +62.50%, which, as explained above, is calculated by taking the percentage difference between the -$0.03 Most Accurate Estimate and the Zacks Consensus Estimate of -$0.08. Alpha and Omega Semiconductor 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.
AOSL is just one of a large group of Computer and Technology stocks with a positive ESP figure. Analog Devices (ADI) is another qualifying stock you may want to consider.
Analog Devices, which is readying to report earnings on February 18, 2026, sits at a Zacks Rank #2 (Buy) right now. Its Most Accurate Estimate is currently $2.37 a share, and ADI is 21 days out from its next earnings report.
The Zacks Consensus Estimate for Analog Devices is $2.31, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +2.57%.
Because both stocks hold a positive Earnings ESP, AOSL and ADI 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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Alpha and Omega Semiconductor Limited (AOSL): Free Stock Analysis Report Analog Devices, Inc. (ADI): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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