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.

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.

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.

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 Cava Group?

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. Cava Group (CAVA Quick QuoteCAVA - Free Report) earns a #2 (Buy) right now and its Most Accurate Estimate sits at $0.12 a share, just 11 days from its upcoming earnings release on November 12, 2024.

By taking the percentage difference between the $0.12 Most Accurate Estimate and the $0.11 Zacks Consensus Estimate, Cava Group has an Earnings ESP of +3.38%. Investors should also know that CAVA 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.

CAVA is part of a big group of Retail and Wholesale stocks that boast a positive ESP, and investors may want to take a look at Best Buy (BBY Quick QuoteBBY - Free Report) as well.

Best Buy, which is readying to report earnings on November 19, 2024, sits at a Zacks Rank #2 (Buy) right now. It's Most Accurate Estimate is currently $1.30 a share, and BBY is 18 days out from its next earnings report.

Best Buy's Earnings ESP figure currently stands at +0.06% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $1.30.

CAVA and BBY'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 >>