These 2 Medical Stocks Could Beat Earnings: Why They Should Be on Your Radar

Zacks highlights its Earnings ESP (Expected Surprise Prediction) model, which combines recent analyst estimate revisions with the Zacks Rank to identify stocks likely to beat quarterly earnings. This methodology, when a positive ESP is paired with a Zacks Rank #3 (Hold) or better, has historically predicted positive earnings surprises 70% of the time and generated average annual returns of 28.3% over a decade. Currently, medical stocks Heron Therapeutics (HRTX) and CVS Health (CVS) show positive ESPs of +100% and +6.35% respectively, suggesting they are poised for potential earnings beats in their upcoming reports.

Analysis

Based on the Zacks Earnings ESP (Expected Surprise Prediction) model, two medical sector stocks, Heron Therapeutics (HRTX) and CVS Health (CVS), are showing quantitative signals that suggest a high probability of beating upcoming quarterly earnings estimates. The model, which has historically predicted positive surprises 70% of the time for qualifying stocks, identifies these opportunities by comparing the Most Accurate Analyst Estimate to the Zacks Consensus Estimate. For Heron Therapeutics, which holds a Zacks Rank #3 (Hold), the Most Accurate Estimate of $0.00 per share results in a +100% ESP against a consensus of -$0.01. CVS Health, carrying a more favorable Zacks Rank #2 (Buy), shows a +6.35% ESP, with its Most Accurate Estimate at $1.55 per share versus a consensus of $1.46. The combination of a positive ESP and a Zacks Rank of #3 or better has reportedly generated average annual returns of 28.3% in a 10-year backtest, highlighting the potential significance of these signals ahead of the companies' respective earnings reports on August 5 and July 31, 2025.

Key Decisions for Investors

• Investors could consider tactical, short-term positions in both HRTX and CVS to potentially capitalize on a positive earnings surprise and subsequent price appreciation.
• Given its stronger Zacks Rank #2 (Buy) in addition to a positive ESP, CVS Health may present a more compelling risk-reward profile compared to HRTX, which has a neutral #3 (Hold) rank.
• While the +100% ESP for Heron Therapeutics is notable, its neutral 'Hold' rating warrants caution, suggesting that any post-earnings rally might be tempered by its perceived in-line market performance outlook.
• It is crucial to recognize that this strategy relies on a quantitative model; while its backtested performance is strong, it is not a guarantee of future results and should be used as one component of a broader investment thesis.