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 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.

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 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 #1 (Strong Buy) 14 days from its next quarterly earnings release on January 23, 2025, and its Most Accurate Estimate comes in at $0.63 a share.

American Airlines' Earnings ESP sits at +2.63%, which, as explained above, is calculated by taking the percentage difference between the $0.63 Most Accurate Estimate and the Zacks Consensus Estimate of $0.62. AAL 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.

AAL is part of a big group of Transportation stocks that boast a positive ESP, and investors may want to take a look at C.H. Robinson Worldwide (CHRW Quick QuoteCHRW - Free Report) as well.

C.H. Robinson Worldwide is a Zacks Rank #2 (Buy) stock, and is getting ready to report earnings on January 29, 2025. CHRW's Most Accurate Estimate sits at $1.13 a share 20 days from its next earnings release.

For C.H. Robinson Worldwide, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $1.13 is +0.22%.

AAL and CHRW'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 >>