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 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.
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 Lululemon?
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. Lululemon (LULU) earns a #3 (Hold) right now and its Most Accurate Estimate sits at $1.70 a share, just 30 days from its upcoming earnings release on June 4, 2026.
By taking the percentage difference between the $1.70 Most Accurate Estimate and the $1.69 Zacks Consensus Estimate, Lululemon has an Earnings ESP of +0.47%. Investors should also know that LULU 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.
LULU is part of a big group of Consumer Discretionary stocks that boast a positive ESP, and investors may want to take a look at Strategic Education (STRA) as well.
Slated to report earnings on July 29, 2026, Strategic Education holds a #2 (Buy) ranking on the Zacks Rank, and its Most Accurate Estimate is $1.81 a share 85 days from its next quarterly update.
For Strategic Education, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $1.77 is +2.26%.
LULU and STRA'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 lululemon athletica inc. (LULU)?
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lululemon athletica inc. (LULU): Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).