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.
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 ranking of #3 (Hold), or 60% of all stocks covered by the Zacks Rank, are expected to perform in-line with the broader market. Stocks with rankings of #2 (Buy) and #1 (Strong Buy), 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 Nvidia?
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. Nvidia (NVDA) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at $0.92 a share nine days away from its upcoming earnings release on May 28, 2025.
NVDA has an Earnings ESP figure of +3.87%, which, as explained above, is calculated by taking the percentage difference between the $0.92 Most Accurate Estimate and the Zacks Consensus Estimate of $0.88. Nvidia 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.
NVDA is just one of a large group of Computer and Technology stocks with a positive ESP figure. Texas Instruments (TXN) is another qualifying stock you may want to consider.
Slated to report earnings on July 22, 2025, Texas Instruments holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is $1.33 a share 64 days from its next quarterly update.
Texas Instruments' Earnings ESP figure currently stands at +0.68% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $1.32.
Because both stocks hold a positive Earnings ESP, NVDA and TXN 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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NVIDIA Corporation (NVDA): Free Stock Analysis Report Texas Instruments Incorporated (TXN): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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