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.
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 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 Tenet Healthcare?
The final step today is to look at a stock that meets our ESP qualifications. Tenet Healthcare (THC) earns a #1 (Strong Buy) 29 days from its next quarterly earnings release on October 27, 2026, and its Most Accurate Estimate comes in at $4.80 a share.
Tenet Healthcare's Earnings ESP sits at +4.59%, which, as explained above, is calculated by taking the percentage difference between the $4.80 Most Accurate Estimate and the Zacks Consensus Estimate of $4.59. THC 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.
THC is one of just a large database of Medical stocks with positive ESPs. Another solid-looking stock is Royalty Pharma (RPRX).
Royalty Pharma is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on November 4, 2026. RPRX's Most Accurate Estimate sits at $1.21 a share 37 days from its next earnings release.
Royalty Pharma's Earnings ESP figure currently stands at +2.98% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $1.18.
Because both stocks hold a positive Earnings ESP, THC and RPRX 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 Tenet Healthcare Corporation (THC)?
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Zacks Investment Research has been committed to providing investors with tools and independent research since 1978. For more than a quarter century, the Zacks Rank stock-rating system has more than doubled the S&P 500 with an average gain of +24.08% per year. (These returns cover a period from January 1, 1988 through May 6, 2024.)
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Tenet Healthcare Corporation (THC): Free Stock Analysis Report
Royalty Pharma PLC (RPRX): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).