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 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.

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.

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 Coterra Energy?

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. Coterra Energy (CTRA Quick QuoteCTRA - Free Report) earns a #3 (Hold) right now and its Most Accurate Estimate sits at $1.17 a share, just six days from its upcoming earnings release on February 22, 2023.

Coterra Energy's Earnings ESP sits at +1.77%, which, as explained above, is calculated by taking the percentage difference between the $1.17 Most Accurate Estimate and the Zacks Consensus Estimate of $1.15. CTRA 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.

CTRA is just one of a large group of Oils and Energy stocks with a positive ESP figure. Occidental Petroleum (OXY Quick QuoteOXY - Free Report) is another qualifying stock you may want to consider.

Occidental Petroleum is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on February 27, 2023. OXY's Most Accurate Estimate sits at $1.75 a share 11 days from its next earnings release.

For Occidental Petroleum, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $1.74 is +0.24%.

CTRA and OXY'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 >>