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.
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.
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.
When we join a positive earnings ESP with a Zacks Rank #3 (Hold) or stronger, stocks posted a positive bottom-line surprise 70% of the time. Plus, this system saw investors produce roughly 28% 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 Inspire Medical Systems?
The final step today is to look at a stock that meets our ESP qualifications. Inspire Medical Systems (INSP) earns a #3 (Hold) 20 days from its next quarterly earnings release on May 4, 2026, and its Most Accurate Estimate comes in at -$0.19 a share.
By taking the percentage difference between the -$0.19 Most Accurate Estimate and the -$0.36 Zacks Consensus Estimate, Inspire Medical Systems has an Earnings ESP of +47.51%. Investors should also know that INSP 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.
INSP is one of just a large database of Medical stocks with positive ESPs. Another solid-looking stock is Gilead Sciences (GILD).
Gilead Sciences is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on May 7, 2026. GILD's Most Accurate Estimate sits at $1.94 a share 23 days from its next earnings release.
Gilead Sciences' Earnings ESP figure currently stands at +3.47% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $1.87.
INSP and GILD'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 >>
Should You Invest in Inspire Medical Systems, Inc. (INSP)?
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Inspire Medical Systems, Inc. (INSP): Free Stock Analysis Report
Gilead Sciences, Inc. (GILD): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).