Wall Street watches a company's quarterly report closely to understand as much as possible about its recent performance and what to expect going forward. Of course, one figure often stands out among the rest: earnings.

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 Expected Surprise Prediction, or ESP, works by locking in on the most up-to-date analyst earnings revisions because they can be more accurate than estimates from weeks or even months before the actual release date. The thinking is pretty straightforward: analysts who provide earnings estimates closer to the report are likely to have more information.

Now that we understand the basic idea, let's look at how the Expected Surprise Prediction works. The ESP is calculated by comparing the Most Accurate Estimate to the Zacks Consensus Estimate, with the percentage difference between the two giving us the Zacks ESP figure.

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.

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 BP?

The last thing we will do today, now that we have a grasp on the ESP and how powerful of a tool it can be, is to quickly look at a qualifying stock. BP (BP Quick QuoteBP - Free Report) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at $0.67 a share 19 days away from its upcoming earnings release on February 4, 2025.

BP has an Earnings ESP figure of +1.01%, which, as explained above, is calculated by taking the percentage difference between the $0.67 Most Accurate Estimate and the Zacks Consensus Estimate of $0.66. BP 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.

BP is part of a big group of Oils and Energy stocks that boast a positive ESP, and investors may want to take a look at Petrobras (PBR Quick QuotePBR - Free Report) as well.

Petrobras is a Zacks Rank #2 (Buy) stock, and is getting ready to report earnings on March 14, 2025. PBR's Most Accurate Estimate sits at $0.84 a share 57 days from its next earnings release.

The Zacks Consensus Estimate for Petrobras is $0.82, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +3.07%.

Because both stocks hold a positive Earnings ESP, BP and PBR 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 >>