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.

We know earnings results are vital, but how a company performs compared to bottom line expectations can be even more important when it comes to stock prices, especially in the near-term. This means that investors might want to take advantage of these 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.

In fact, when we combined a Zacks Rank #3 (Hold) or better and a positive Earnings ESP, stocks produced a positive surprise 70% of the time. Perhaps most importantly, using these parameters has helped produce 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 American Airlines?

The final step today is to look at a stock that meets our ESP qualifications. American Airlines (AAL Quick QuoteAAL - Free Report) earns a #2 (Buy) one day from its next quarterly earnings release on October 24, 2024, and its Most Accurate Estimate comes in at $0.17 a share.

AAL has an Earnings ESP figure of +32.87%, which, as explained above, is calculated by taking the percentage difference between the $0.17 Most Accurate Estimate and the Zacks Consensus Estimate of $0.13. American Airlines 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.

AAL is part of a big group of Transportation stocks that boast a positive ESP, and investors may want to take a look at United Parcel Service (UPS Quick QuoteUPS - Free Report) as well.

Slated to report earnings on October 24, 2024, United Parcel Service holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is $1.70 a share one day from its next quarterly update.

United Parcel Service's Earnings ESP figure currently stands at +3.24% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $1.65.

Because both stocks hold a positive Earnings ESP, AAL and UPS 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 >>