Earnings are arguably the most important single number on a company's quarterly financial report. Wall Street clearly dives into all of the other metrics and management's input, but the EPS figure helps cut through all the noise.

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 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.

Now that we understand the basic idea, let's look at how the Expected Surprise Prediction works. The ESP is calculated by comparing the Most Accurate Estimate to the Zacks Consensus Estimate, with the percentage difference between the two giving us the Zacks ESP figure.

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 Air Products and Chemicals?

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. Air Products and Chemicals (APD Quick QuoteAPD - Free Report) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at $2.95 a share 20 days away from its upcoming earnings release on February 6, 2025.

By taking the percentage difference between the $2.95 Most Accurate Estimate and the $2.87 Zacks Consensus Estimate, Air Products and Chemicals has an Earnings ESP of +2.46%. Investors should also know that APD 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.

APD is one of just a large database of Basic Materials stocks with positive ESPs. Another solid-looking stock is Kinross Gold (KGC Quick QuoteKGC - Free Report) .

Kinross Gold is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on February 12, 2025. KGC's Most Accurate Estimate sits at $0.31 a share 26 days from its next earnings release.

The Zacks Consensus Estimate for Kinross Gold is $0.23, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +36.76%.

Because both stocks hold a positive Earnings ESP, APD and KGC 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 >>