How to Use Earnings ESP to Identify Medical Stocks Poised to Outperform in Q4 2025

The medical sector, characterized by its resilience and innovation-driven growth, often presents unique opportunities for investors seeking stocks likely to outperform. A powerful tool in this pursuit is the Zacks Earnings Surprise Predictor (ESP), a metric designed to forecast the magnitude of a company's earnings surprise based on the trajectory of analyst estimate revisions. By analyzing how analysts adjust their earnings forecasts over time, investors can identify stocks with improving fundamentals and a higher probability of beating expectations. This article explores how to leverage the Zacks ESP model, focusing on four medical stocks-Zoetis (ZTS), Halozyme (HALO), Novartis (NVS), and Exact Sciences (EXAS)-as case studies for proactive, data-driven investing in Q4 2025.

Understanding the Zacks Earnings ESP Model

The Zacks ESP model operates on the principle that analyst estimate revisions reflect collective wisdom about a company's future performance. When analysts consistently raise their earnings forecasts, it signals growing confidence in a company's ability to exceed expectations. Conversely, downward revisions often precede underperformance. The ESP score quantifies this dynamic, assigning higher probabilities of outperformance to stocks with upward revisions and strong momentum in earnings estimates().

For medical stocks, where regulatory approvals, clinical trial results, and product launches can drive volatility, the ESP model offers a structured approach to navigating uncertainty. By focusing on stocks with accelerating estimate revisions, investors can position themselves ahead of positive earnings surprises, which often trigger short-term price momentum.

Case Study 1: Zoetis (ZTS) – Leveraging Animal Health Demand

Zoetis, a global leader in animal health products, has historically benefited from steady demand for livestock and companion animal care. Its diversified portfolio, including vaccines, diagnostics, and therapeutics, positions it to capitalize on long-term trends such as food security and pet humanization. While specific Q4 2025 data remains unavailable, Zoetis's R&D investments and market leadership in animal health historically correlate with stable earnings revisions.

Investors using the ESP model should monitor ZTS for signs of upward revisions in its earnings forecasts, particularly around product launches or geographic expansion. A rising ESP score would indicate strengthening analyst sentiment, suggesting a higher likelihood of outperforming earnings expectations in Q4 2025.

Case Study 2: Halozyme (HALO) – Innovation in Drug Delivery

Halozyme's focus on enhancing drug delivery technologies, such as its Enhanze® platform, places it at the intersection of biopharma innovation. Collaborations with major pharmaceutical firms to optimize drug absorption and reduce dosing frequency have driven revenue growth. In the absence of real-time Q4 2025 data, Halozyme's Enhanze platform and partnerships often drive short-term optimism reflected in earnings forecasts.

For Q4 2025, investors should watch for upward trends in HALO's earnings estimates, particularly if new partnerships or regulatory approvals materialize. A rising ESP score would signal improving confidence in its ability to scale revenue and meet or exceed earnings targets.

Case Study 3: Novartis (NVS) – Diversified Pharma Stability

As a multinational pharmaceutical giant, Novartis balances innovation with a robust portfolio of established therapies. Its recent investments in gene therapy and oncology, coupled with cost-cutting initiatives, have stabilized earnings growth. While Q4 2025 specifics are absent, Novartis's diversified portfolio and cost discipline have historically supported positive estimate revisions.

The ESP model suggests that NVS could be a candidate for outperformance if analysts continue to raise forecasts, reflecting optimism about its pipeline or operational efficiency. Investors should prioritize NVS if its ESP score trends upward in the coming months.

Case Study 4: Exact Sciences (EXAS) – Precision Diagnostics Growth

Exact Sciences, known for its non-invasive Cologuard® test and other precision diagnostics, is well-positioned to benefit from the shift toward early disease detection. Its recurring revenue model and expanding test menu create long-term growth potential. Although Q4 2025 data is not yet available, Exact Sciences's Cologuard test and expanding diagnostics menu typically influence upward earnings revisions.

For Q4 2025, a rising ESP score for EXAS would indicate growing confidence in its ability to scale test volumes and maintain profitability. Investors should monitor estimate revisions closely, as they may foreshadow a significant earnings beat.

Actionable Strategies for Proactive Investing

1. Track Analyst Estimate Revisions: Use the Zacks ESP model to identify medical stocks with accelerating upward revisions. , which correlate with higher outperformance probabilities.
2. Combine with Fundamentals: Cross-reference ESP signals with a company's product pipeline, regulatory risks, and market positioning. For example, ZTS's animal health demand or EXAS's diagnostic innovation adds qualitative confidence to quantitative signals.
3. Time Entries Strategically: Enter positions ahead of earnings releases when ESP scores and estimate revisions suggest a high likelihood of outperformance. This approach allows investors to capitalize on post-earnings price momentum.

Conclusion

The Zacks Earnings ESP model provides a robust framework for identifying medical stocks poised to outperform, particularly in a sector driven by innovation and regulatory dynamics. By analyzing Zoetis, Halozyme, Novartis, and Exact Sciences through the lens of analyst estimate revisions, investors can make informed decisions ahead of Q4 2025 earnings season. While the absence of real-time data for this period necessitates a focus on historical trends and fundamentals, the methodology remains actionable. Proactive investors who integrate the ESP model into their strategy are well-positioned to capitalize on the medical sector's unique growth drivers.

(): The Zacks Earnings ESP model evaluates the rate of change in analyst earnings estimates to predict surprise magnitudes.
(): Zoetis's R&D investments and market leadership in animal health historically correlate with stable earnings revisions.
(): Halozyme's Enhanze platform and partnerships often drive short-term optimism reflected in earnings forecasts.
(): Novartis's diversified portfolio and cost discipline have historically supported positive estimate revisions.
(): Exact Sciences's Cologuard test and expanding diagnostics menu typically influence upward earnings revisions.