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 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.
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 Super Micro Computer?
Now that we understand what the ESP is and how beneficial it can be, let's dive into a stock that currently fits the bill. Super Micro Computer (SMCI) earns a #3 (Hold) right now and its Most Accurate Estimate sits at $1.69 a share, just seven days from its upcoming earnings release on November 3, 2026.
By taking the percentage difference between the $1.69 Most Accurate Estimate and the $1.24 Zacks Consensus Estimate, Super Micro Computer has an Earnings ESP of +36.36%. Investors should also know that SMCI 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.
SMCI is part of a big group of Computer and Technology stocks that boast a positive ESP, and investors may want to take a look at ON Semiconductor Corp. (ON) as well.
Slated to report earnings on November 2, 2026, ON Semiconductor Corp. holds a #3 (Hold) ranking on the Zacks Rank, and its Most Accurate Estimate is $0.93 a share six days from its next quarterly update.
The Zacks Consensus Estimate for ON Semiconductor Corp. is $0.88, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +5.68%.
Because both stocks hold a positive Earnings ESP, SMCI and ON 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 Super Micro Computer, Inc. (SMCI)?
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Super Micro Computer, Inc. (SMCI): Free Stock Analysis Report
ON Semiconductor Corporation (ON): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).