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 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.

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.

Most stocks, about 60%, fall into the #3 (Hold) category, and they are expected to perform in-line with the broader market. Stocks with a #2 (Buy) and #1 (Strong Buy) rating, or the top 15% and top 5% of stocks, respectively, should outperform the market, with Strong Buy stocks outperforming more than any other rank.

Should You Consider Deere?

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. Deere (DE Quick QuoteDE - Free Report) earns a #3 (Hold) right now and its Most Accurate Estimate sits at $7.85 a share, just 18 days from its upcoming earnings release on May 17, 2024.

Deere's Earnings ESP sits at +0.21%, which, as explained above, is calculated by taking the percentage difference between the $7.85 Most Accurate Estimate and the Zacks Consensus Estimate of $7.83. DE 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.

DE is just one of a large group of Industrial Products stocks with a positive ESP figure. Stanley Black & Decker (SWK Quick QuoteSWK - Free Report) is another qualifying stock you may want to consider.

Slated to report earnings on May 2, 2024, Stanley Black & Decker holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is $0.56 a share three days from its next quarterly update.

Stanley Black & Decker's Earnings ESP figure currently stands at +1.37% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $0.55.

Because both stocks hold a positive Earnings ESP, DE and SWK 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 >>