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 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.

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.

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 Zebra Technologies?

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. Zebra Technologies (ZBRA Quick QuoteZBRA - Free Report) earns a #3 (Hold) right now and its Most Accurate Estimate sits at $3.30 a share, just 11 days from its upcoming earnings release on October 29, 2024.

By taking the percentage difference between the $3.30 Most Accurate Estimate and the $3.24 Zacks Consensus Estimate, Zebra Technologies has an Earnings ESP of +2.01%. Investors should also know that ZBRA 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.

ZBRA is just one of a large group of Industrial Products stocks with a positive ESP figure. Stanley Black & Decker (SWK Quick QuoteSWK - Free Report) is another qualifying stock you may want to consider.

Slated to report earnings on October 29, 2024, Stanley Black & Decker holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is $1.07 a share 11 days from its next quarterly update.

For Stanley Black & Decker, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $1.03 is +3.54%.

ZBRA and SWK'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 >>