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.
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 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.
Bringing together a positive earnings ESP alongside a Zacks Rank #3 (Hold) or better has helped stocks report a positive earnings surprise 70% of the time. Furthermore, by using these parameters, investors have seen 28.3% 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 Carpenter Technology?
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. Carpenter Technology (CRS) holds a #2 (Buy) at the moment and its Most Accurate Estimate comes in at $3.04 a share 21 days away from its upcoming earnings release on July 30, 2026.
Carpenter Technology's Earnings ESP sits at +0.17%, which, as explained above, is calculated by taking the percentage difference between the $3.04 Most Accurate Estimate and the Zacks Consensus Estimate of $3.03. CRS 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.
CRS is one of just a large database of Basic Materials stocks with positive ESPs. Another solid-looking stock is Southern Copper (SCCO).
Slated to report earnings on August 4, 2026, Southern Copper holds a #3 (Hold) ranking on the Zacks Rank, and its Most Accurate Estimate is $1.94 a share 26 days from its next quarterly update.
The Zacks Consensus Estimate for Southern Copper is $1.90, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +2.38%.
Because both stocks hold a positive Earnings ESP, CRS and SCCO 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 Carpenter Technology Corporation (CRS)?
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Carpenter Technology Corporation (CRS): Free Stock Analysis Report
Southern Copper Corporation (SCCO): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).