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.

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.

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 AutoZone?

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. AutoZone (AZO Quick QuoteAZO - Free Report) earns a #3 (Hold) right now and its Most Accurate Estimate sits at $31.32 a share, just 29 days from its upcoming earnings release on December 5, 2023.

AZO has an Earnings ESP figure of +2.61%, which, as explained above, is calculated by taking the percentage difference between the $31.32 Most Accurate Estimate and the Zacks Consensus Estimate of $30.52. AutoZone 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.

AZO is just one of a large group of Retail and Wholesale stocks with a positive ESP figure. Walmart (WMT Quick QuoteWMT - Free Report) is another qualifying stock you may want to consider.

Walmart is a Zacks Rank #2 (Buy) stock, and is getting ready to report earnings on November 16, 2023. WMT's Most Accurate Estimate sits at $1.52 a share 10 days from its next earnings release.

Walmart's Earnings ESP figure currently stands at +1.02% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $1.50.

AZO and WMT'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 >>