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.

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.

2 Stocks to Add to Your Watchlist

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. 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.

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. Nutanix (NTNX) earns a Zacks Rank #3 right now and its Most Accurate Estimate sits at $0.21 a share, just two days from its upcoming earnings release on August 28, 2024.

Nutanix's Earnings ESP sits at 7.48%, which, as explained above, is calculated by taking the percentage difference between the $0.21 Most Accurate Estimate and the Zacks Consensus Estimate of $0.20.

NTNX is one of just a large database of Computer and Technology stocks with positive ESPs. Another solid-looking stock is Analog Devices (ADI).

Analog Devices, which is readying to report earnings on November 19, 2024, sits at a Zacks Rank #3 (Hold) right now. It's Most Accurate Estimate is currently $1.64 a share, and ADI is 85 days out from its next earnings report.

Analog Devices' Earnings ESP figure currently stands at 0.95% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $1.63.

NTNX and ADI'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 >>

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