Wall Street watches a company's quarterly report closely to understand as much as possible about its recent performance and what to expect going forward. Of course, one figure often stands out among the rest: earnings.
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 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.
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.
In fact, when we combined a Zacks Rank #3 (Hold) or better and a positive Earnings ESP, stocks produced a positive surprise 70% of the time. Perhaps most importantly, using these parameters has helped produce 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 T. Rowe Price?
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. T. Rowe Price (TROW) earns a #3 (Hold) right now and its Most Accurate Estimate sits at $2.51 a share, just 23 days from its upcoming earnings release on July 31, 2026.
T. Rowe Price's Earnings ESP sits at +6.79%, which, as explained above, is calculated by taking the percentage difference between the $2.51 Most Accurate Estimate and the Zacks Consensus Estimate of $2.35. TROW 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.
TROW is part of a big group of Finance stocks that boast a positive ESP, and investors may want to take a look at Agree Realty (ADC) as well.
Agree Realty, which is readying to report earnings on July 30, 2026, sits at a Zacks Rank #3 (Hold) right now. Its Most Accurate Estimate is currently $1.14 a share, and ADC is 22 days out from its next earnings report.
The Zacks Consensus Estimate for Agree Realty is $1.13, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +0.27%.
TROW and ADC'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 T. Rowe Price Group, Inc. (TROW)?
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T. Rowe Price Group, Inc. (TROW): Free Stock Analysis Report
Agree Realty Corporation (ADC): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).