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 Earnings ESP, or Expected Surprise Prediction, aims to find earnings surprises by focusing on the most recent analyst revisions. The basic premise is that if an analyst reevaluates their earnings estimate ahead of an earnings release, it means they likely have new information that could possibly be more accurate.
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.
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.
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 Ralph Lauren?
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. Ralph Lauren (RL) earns a #3 (Hold) right now and its Most Accurate Estimate sits at $2.53 a share, just 20 days from its upcoming earnings release on May 28, 2026.
Ralph Lauren's Earnings ESP sits at +1.84%, which, as explained above, is calculated by taking the percentage difference between the $2.53 Most Accurate Estimate and the Zacks Consensus Estimate of $2.49. RL 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.
RL is one of just a large database of Consumer Discretionary stocks with positive ESPs. Another solid-looking stock is Peloton (PTON).
Slated to report earnings on August 6, 2026, Peloton holds a #3 (Hold) ranking on the Zacks Rank, and its Most Accurate Estimate is $0.14 a share 90 days from its next quarterly update.
The Zacks Consensus Estimate for Peloton is $0.11, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +25.64%.
Because both stocks hold a positive Earnings ESP, RL and PTON 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 >>
Should You Invest in Ralph Lauren Corporation (RL)?
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Ralph Lauren Corporation (RL): Free Stock Analysis Report
Peloton Interactive, Inc. (PTON): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).