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.
The earnings figure itself is key, of course, but a beat or miss on the bottom line can sometimes be just as, if not more, important. Therefore, investors should consider paying close attention to these earnings surprises, as a big beat can help a stock climb and vice versa.
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 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 Lam Research?
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. Lam Research (LRCX) earns a #3 (Hold) right now and its Most Accurate Estimate sits at $1.70 a share, just 30 days from its upcoming earnings release on July 29, 2026.
LRCX has an Earnings ESP figure of +3.09%, which, as explained above, is calculated by taking the percentage difference between the $1.70 Most Accurate Estimate and the Zacks Consensus Estimate of $1.65. Lam Research is one of a large database 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.
LRCX 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 Yelp (YELP) as well.
Slated to report earnings on August 6, 2026, Yelp holds a #3 (Hold) ranking on the Zacks Rank, and its Most Accurate Estimate is $0.36 a share 38 days from its next quarterly update.
For Yelp, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $0.33 is +8.43%.
LRCX and YELP's positive ESP metrics may signal that a positive earnings surprise for both stocks is on the horizon.
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 Lam Research Corporation (LRCX)?
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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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Lam Research Corporation (LRCX): Free Stock Analysis Report
Yelp Inc. (YELP): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).