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.
The earnings figure itself is key, of course, but a beat or miss on the bottom line can sometimes be just as, if not more, important. Therefore, investors should consider paying close attention to these earnings surprises, as a big beat can help a stock climb and vice versa.
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.
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 Netflix?
The last thing we will do today, now that we have a grasp on the ESP and how powerful of a tool it can be, is to quickly look at a qualifying stock. Netflix (NFLX) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at $0.77 a share 30 days away from its upcoming earnings release on April 16, 2026.
By taking the percentage difference between the $0.77 Most Accurate Estimate and the $0.76 Zacks Consensus Estimate, Netflix has an Earnings ESP of +0.71%. Investors should also know that NFLX 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.
NFLX is just one of a large group of Consumer Discretionary stocks with a positive ESP figure. MGM Resorts (MGM) is another qualifying stock you may want to consider.
MGM Resorts is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on April 29, 2026. MGM's Most Accurate Estimate sits at $0.75 a share 43 days from its next earnings release.
The Zacks Consensus Estimate for MGM Resorts is $0.62, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +20.97%.
NFLX and MGM'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 Netflix, Inc. (NFLX)?
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This article originally published on Zacks Investment Research (zacks.com).