Two factors often determine stock prices in the long run: earnings and interest rates. Investors can't control the latter, but they can focus on a company's earnings results every quarter.
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.
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.
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 Veracyte?
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. Veracyte (VCYT) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at $0.45 a share 14 days away from its upcoming earnings release on November 4, 2026.
Veracyte's Earnings ESP sits at +4.65%, which, as explained above, is calculated by taking the percentage difference between the $0.45 Most Accurate Estimate and the Zacks Consensus Estimate of $0.43. VCYT 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.
VCYT is one of just a large database of Medical stocks with positive ESPs. Another solid-looking stock is Idexx Laboratories (IDXX).
Slated to report earnings on November 2, 2026, Idexx Laboratories holds a #2 (Buy) ranking on the Zacks Rank, and its Most Accurate Estimate is $3.73 a share 12 days from its next quarterly update.
The Zacks Consensus Estimate for Idexx Laboratories is $3.71, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +0.59%.
Because both stocks hold a positive Earnings ESP, VCYT and IDXX 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 Veracyte, Inc. (VCYT)?
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Veracyte, Inc. (VCYT): Free Stock Analysis Report
IDEXX Laboratories, Inc. (IDXX): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).