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.
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.
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.
Bringing together a positive earnings ESP alongside a Zacks Rank #3 (Hold) or better has helped stocks report a positive earnings surprise 70% of the time. Furthermore, by using these parameters, investors have seen 28.3% annual returns on average, according to our 10 year backtest.
Stocks with a #3 (Hold) ranking, which is most stocks covered at 60%, are expected to perform in-line with the broader market. But stocks that fall into the #2 (Buy) and #1 (Strong Buy) ranking, 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 MasterCard?
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.
MasterCard ( earns a #3 (Hold) right now and its Most Accurate Estimate sits at $2.62 a share, just 30 days from its upcoming earnings release on January 26, 2023. MA Quick Quote MA - Free Report)
MasterCard's Earnings ESP sits at +2.34%, which, as explained above, is calculated by taking the percentage difference between the $2.62 Most Accurate Estimate and the Zacks Consensus Estimate of $2.56. MA 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.
MA is just one of a large group of Business Services stocks with a positive ESP figure.
Core & Main ( is another qualifying stock you may want to consider. CNM Quick Quote CNM - Free Report)
Core & Main is a Zacks Rank #2 (Buy) stock, and is getting ready to report earnings on March 29, 2023. CNM's Most Accurate Estimate sits at $0.33 a share 92 days from its next earnings release.
For Core & Main, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $0.32 is +3.13%.
MA and CNM'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 >>