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.

Life and the stock market are both about expectations, and rising above what is expected is often rewarded, while falling short can come with negative consequences. Investors might want to try to capture stronger returns by finding positive 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 Bristol Myers Squibb?

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. Bristol Myers Squibb (BMY Quick QuoteBMY - Free Report) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at $1.47 a share seven days away from its upcoming earnings release on February 6, 2025.

Bristol Myers Squibb's Earnings ESP sits at +0.43%, which, as explained above, is calculated by taking the percentage difference between the $1.47 Most Accurate Estimate and the Zacks Consensus Estimate of $1.46. BMY 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.

BMY is one of just a large database of Medical stocks with positive ESPs. Another solid-looking stock is Guardant Health (GH Quick QuoteGH - Free Report) .

Guardant Health, which is readying to report earnings on February 27, 2025, sits at a Zacks Rank #3 (Hold) right now. It's Most Accurate Estimate is currently -$0.49 a share, and GH is 28 days out from its next earnings report.

The Zacks Consensus Estimate for Guardant Health is -$0.50, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +1.75%.

BMY and GH'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 >>