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.
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.
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 Eaton?
The final step today is to look at a stock that meets our ESP qualifications. Eaton (ETN) earns a #2 (Buy) 11 days from its next quarterly earnings release on November 3, 2026, and its Most Accurate Estimate comes in at $3.56 a share.
Eaton's Earnings ESP sits at +0.67%, which, as explained above, is calculated by taking the percentage difference between the $3.56 Most Accurate Estimate and the Zacks Consensus Estimate of $3.54. ETN 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.
ETN is one of just a large database of Industrial Products stocks with positive ESPs. Another solid-looking stock is Caterpillar (CAT).
Caterpillar, which is readying to report earnings on October 29, 2026, sits at a Zacks Rank #2 (Buy) right now. Its Most Accurate Estimate is currently $7.33 a share, and CAT is six days out from its next earnings report.
Caterpillar's Earnings ESP figure currently stands at +2.98% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $7.12.
ETN and CAT's positive ESP metrics may signal that a positive earnings surprise for both stocks is on the horizon.
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 Eaton Corporation, PLC (ETN)?
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Eaton Corporation, PLC (ETN): Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).