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.

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 Accenture?

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. Accenture (ACN) earns a #3 (Hold) right now and its Most Accurate Estimate sits at $2.64 a share, just eight days from its upcoming earnings release on September 28, 2023.

ACN has an Earnings ESP figure of +0.88%, which, as explained above, is calculated by taking the percentage difference between the $2.64 Most Accurate Estimate and the Zacks Consensus Estimate of $2.62. Accenture 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.

ACN is one of just a large database of Business Services stocks with positive ESPs. Another solid-looking stock is SPX Technologies (SPXC).

SPX Technologies is a Zacks Rank #1 (Strong Buy) stock, and is getting ready to report earnings on November 2, 2023. SPXC’s Most Accurate Estimate sits at $1.02 a share 43 days from its next earnings release.

The Zacks Consensus Estimate for SPX Technologies is $0.95, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +6.99%.

ACN and SPXC’s positive ESP figures tell us that both stocks have a good chance at beating analyst expectations in their next earnings report.
Accenture PLC (ACN): Free Stock Analysis Report

SPX Technologies, Inc. (SPXC): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

This article originally appeared on Zacks

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.