Earnings are arguably the most important single number on a company's quarterly financial report. Wall Street clearly dives into all of the other metrics and management's input, but the EPS figure helps cut through all the noise.

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.

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.

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 Elevance Health?

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. Elevance Health (ELV Quick QuoteELV - Free Report) earns a #2 (Buy) right now and its Most Accurate Estimate sits at $9.71 a share, just one day from its upcoming earnings release on October 17, 2024.

By taking the percentage difference between the $9.71 Most Accurate Estimate and the $9.70 Zacks Consensus Estimate, Elevance Health has an Earnings ESP of +0.12%. Investors should also know that ELV 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.

ELV is just one of a large group of Medical stocks with a positive ESP figure. ANI Pharmaceuticals (ANIP Quick QuoteANIP - Free Report) is another qualifying stock you may want to consider.

ANI Pharmaceuticals, which is readying to report earnings on November 13, 2024, sits at a Zacks Rank #1 (Strong Buy) right now. It's Most Accurate Estimate is currently $1.10 a share, and ANIP is 28 days out from its next earnings report.

The Zacks Consensus Estimate for ANI Pharmaceuticals is $1.07, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +2.5%.

ELV and ANIP's positive ESP metrics may signal that a positive earnings surprise for both stocks is on the horizon.

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 >>