Earnings are arguably the most important single number on a company's quarterly financial report. Wall Street clearly dives into all of the other metrics and management's input, but the EPS figure helps cut through all the noise.
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.
In fact, when we combined a Zacks Rank #3 (Hold) or better and a positive Earnings ESP, stocks produced a positive surprise 70% of the time. Perhaps most importantly, using these parameters has helped produce 28.3% annual returns on average, according to our 10 year backtest.
Stocks with a ranking of #3 (Hold), or 60% of all stocks covered by the Zacks Rank, are expected to perform in-line with the broader market. Stocks with rankings of #2 (Buy) and #1 (Strong Buy), 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 Exxon Mobil Holdings?
The final step today is to look at a stock that meets our ESP qualifications. Exxon Mobil Holdings (XOM) earns a #3 (Hold) 29 days from its next quarterly earnings release on August 7, 2026, and its Most Accurate Estimate comes in at $4.16 a share.
By taking the percentage difference between the $4.16 Most Accurate Estimate and the $3.98 Zacks Consensus Estimate, Exxon Mobil Holdings has an Earnings ESP of +4.40%. Investors should also know that XOM 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.
XOM is part of a big group of Oils and Energy stocks that boast a positive ESP, and investors may want to take a look at Baker Hughes (BKR) as well.
Baker Hughes, which is readying to report earnings on July 26, 2026, sits at a Zacks Rank #3 (Hold) right now. Its Most Accurate Estimate is currently $0.56 a share, and BKR is 17 days out from its next earnings report.
The Zacks Consensus Estimate for Baker Hughes is $0.50, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +12.38%.
Because both stocks hold a positive Earnings ESP, XOM and BKR 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 ExxonMobil Holdings Corporation (XOM)?
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ExxonMobil Holdings Corporation (XOM): Free Stock Analysis Report
Baker Hughes Company (BKR): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).