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.

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.

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 Scorpio Tankers?

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. Scorpio Tankers (STNG Quick QuoteSTNG - Free Report) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at $3.88 a share 29 days away from its upcoming earnings release on May 7, 2024.

By taking the percentage difference between the $3.88 Most Accurate Estimate and the $3.80 Zacks Consensus Estimate, Scorpio Tankers has an Earnings ESP of +2.1%. Investors should also know that STNG is one of a large group 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.

STNG is one of just a large database of Transportation stocks with positive ESPs. Another solid-looking stock is Star Bulk Carriers (SBLK Quick QuoteSBLK - Free Report) .

Slated to report earnings on May 21, 2024, Star Bulk Carriers holds a #1 (Strong Buy) ranking on the Zacks Rank, and it's Most Accurate Estimate is $0.89 a share 43 days from its next quarterly update.

For Star Bulk Carriers, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $0.87 is +2.89%.

Because both stocks hold a positive Earnings ESP, STNG and SBLK 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 >>