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 Earnings ESP, or Expected Surprise Prediction, aims to find earnings surprises by focusing on the most recent analyst revisions. The basic premise is that if an analyst reevaluates their earnings estimate ahead of an earnings release, it means they likely have new information that could possibly be more accurate.

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.

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.

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 Dick's Sporting Goods?

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. Dick's Sporting Goods (DKS Quick QuoteDKS - Free Report) earns a #3 (Hold) right now and its Most Accurate Estimate sits at $2.97 a share, just 13 days from its upcoming earnings release on May 29, 2024.

By taking the percentage difference between the $2.97 Most Accurate Estimate and the $2.96 Zacks Consensus Estimate, Dick's Sporting Goods has an Earnings ESP of +0.06%. Investors should also know that DKS 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.

DKS is part of a big group of Retail and Wholesale stocks that boast a positive ESP, and investors may want to take a look at Amazon (AMZN Quick QuoteAMZN - Free Report) as well.

Amazon, which is readying to report earnings on August 1, 2024, sits at a Zacks Rank #3 (Hold) right now. It's Most Accurate Estimate is currently $1.03 a share, and AMZN is 77 days out from its next earnings report.

For Amazon, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $1.02 is +1.31%.

DKS and AMZN'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 >>