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.

The earnings figure itself is key, of course, but a beat or miss on the bottom line can sometimes be just as, if not more, important. Therefore, investors should consider paying close attention to these earnings surprises, as a big beat can help a stock climb and vice versa.

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.

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.

When we join a positive earnings ESP with a Zacks Rank #3 (Hold) or stronger, stocks posted a positive bottom-line surprise 70% of the time. Plus, this system saw investors produce roughly 28% 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 Texas Instruments?

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. Texas Instruments (TXN Quick QuoteTXN - Free Report) earns a #3 (Hold) right now and its Most Accurate Estimate sits at $1.37 a share, just seven days from its upcoming earnings release on October 22, 2024.

Texas Instruments' Earnings ESP sits at +0.44%, which, as explained above, is calculated by taking the percentage difference between the $1.37 Most Accurate Estimate and the Zacks Consensus Estimate of $1.36. TXN is also part of a large group of stocks that boast a positive ESP. Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they've reported.

TXN is one of just a large database of Computer and Technology stocks with positive ESPs. Another solid-looking stock is Lyft (LYFT Quick QuoteLYFT - Free Report) .

Slated to report earnings on November 13, 2024, Lyft holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is $0.23 a share 29 days from its next quarterly update.

For Lyft, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $0.19 is +21.05%.

TXN and LYFT'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 >>