Quarterly financial reports play a vital role on Wall Street, as they help investors see how a company has performed and what might be coming down the road in the near-term. And out of all of the metrics and results to consider, earnings is one of the most important.
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 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.
Now that we understand the basic idea, let's look at how the Expected Surprise Prediction works. The ESP is calculated by comparing the Most Accurate Estimate to the Zacks Consensus Estimate, with the percentage difference between the two giving us the Zacks ESP figure.
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 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 Dynatrace?
The final step today is to look at a stock that meets our ESP qualifications. Dynatrace (DT) earns a #3 (Hold) 30 days from its next quarterly earnings release on May 13, 2026, and its Most Accurate Estimate comes in at $0.39 a share.
Dynatrace's Earnings ESP sits at +1.42%, which, as explained above, is calculated by taking the percentage difference between the $0.39 Most Accurate Estimate and the Zacks Consensus Estimate of $0.38. DT 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.
DT is just one of a large group of Computer and Technology stocks with a positive ESP figure. TSMC (TSM) is another qualifying stock you may want to consider.
TSMC, which is readying to report earnings on April 16, 2026, sits at a Zacks Rank #3 (Hold) right now. Its Most Accurate Estimate is currently $3.40 a share, and TSM is three days out from its next earnings report.
For TSMC, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $3.29 is +3.24%.
Because both stocks hold a positive Earnings ESP, DT and TSM 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 Dynatrace, Inc. (DT)?
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Dynatrace, Inc. (DT): Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).