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.

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 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 Southern Co.

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. Southern Co. (SO Quick QuoteSO - Free Report) earns a #2 (Buy) right now and its Most Accurate Estimate sits at $0.61 a share, just nine days from its upcoming earnings release on February 15, 2024.

SO has an Earnings ESP figure of +2.95%, which, as explained above, is calculated by taking the percentage difference between the $0.61 Most Accurate Estimate and the Zacks Consensus Estimate of $0.59. Southern Co. 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.

SO is one of just a large database of Utilities stocks with positive ESPs. Another solid-looking stock is Dominion Energy (D Quick QuoteD - Free Report) .

Slated to report earnings on February 22, 2024, Dominion Energy holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is $0.40 a share 16 days from its next quarterly update.

The Zacks Consensus Estimate for Dominion Energy is $0.40, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +0.63%.

Because both stocks hold a positive Earnings ESP, SO and D 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 >>