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.
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.
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 CyberArk?
The final step today is to look at a stock that meets our ESP qualifications. CyberArk (CYBR) earns a #3 (Hold) 30 days from its next quarterly earnings release on February 13, 2025, and its Most Accurate Estimate comes in at $0.72 a share.
By taking the percentage difference between the $0.72 Most Accurate Estimate and the $0.71 Zacks Consensus Estimate, CyberArk has an Earnings ESP of +0.6%. Investors should also know that CYBR 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.
CYBR is part of a big group of Computer and Technology stocks that boast a positive ESP, and investors may want to take a look at Adobe Systems (ADBE) as well.
Adobe Systems is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on March 13, 2025. ADBE's Most Accurate Estimate sits at $4.98 a share 58 days from its next earnings release.
For Adobe Systems, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $4.97 is +0.17%.
Because both stocks hold a positive Earnings ESP, CYBR and ADBE 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 >>
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