Second-quarter earnings results so far are rather disappointing as expected. The pathetic performance can be blamed solely on the global outbreak of coronavirus and consequent lockdowns.
Despite this gloomy scenario, the technology sector is expected to perform relatively better this earnings season. Notably, a few tech stocks with a favorable Zacks Rank are likely to beat earnings estimates this month.
Tech Sector Vs. Broad-Market Q2 Earnings Expectations
As of Jul 17, overall, second-quarter earnings for the S&P 500 Index are projected to be down 44.3% year over year on 10.3% lower revenues. However, for the technology sector, second-quarter earnings are expected to be down 12.7% year over year on 1% lower revenues.
Notably, first-quarter earnings of companies on the S&P 500 Index were down 13.5% on 1.4% higher revenues. Despite this, total earnings of the technology sector as a whole grew 3.8% year over year on 4% higher revenues in the first quarter. (Read More: Previewing the Tech Sector's First Full Coronavirus Earnings Season)
Technology Sector in Q2
Despite a coronavirus-stricken U.S. and global economy, the technology sector managed to maintain its foothold as the last few years saw a series of breakthroughs in cloud computing, predictive analysis, AI, self-driving vehicles, digital personal assistants and IoT, which have set the stage for robust growth for technology stocks. In this regard, large-scale commercial deployment of 5G wireless network has boosted the overall technology sector.
Meanwhile, the outbreak of coronavirus globally has established digitization as the new normal for what is being touted as going to be a very long time. And as social distancing is keeping near and dear ones away, people, especially citizens of emerging and less-developed countries, are reaching out more than ever with smartphones, tablets or notebooks.
The result of these positive developments reflected in stock markets. The S&P 500 Index — popularly known as Wall Street's benchmark — rallied 20% in second-quarter 2020 while the Technology Select Sector SPDR (XLK), one of the 11 broad sectors of the S&P 500 Index, jumped 30.4%. The tech-laden Nasdaq Composite also climbed 30.5%.
Our Top Picks
We have narrowed down our search to five technology stocks slated to release earnings results this month. Each of these stocks carries a Zacks Rank #2 (Buy) and has a positive Earnings ESP. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Our research shows that for stocks with the combination of a Zacks Rank #3 or better and a positive Earnings ESP, the chance of an earnings beat is as high as 70%. These stocks are expected to soar after earnings release. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
The chart below shows the price performance of our five picks in the last quarter.
Texas Instruments Inc. TXN designs, manufactures and sells semiconductors to electronics designers and manufacturers worldwide. It operates in two segments, Analog and Embedded Processing. The company has an Earnings ESP of +6.19%.
The Zacks Consensus Estimate for Texas Instruments' current-year earnings has improved 0.5% over the last 7 days. It has a trailing four-quarter earnings surprise of 11.2%, on average. The company is set to release earnings results on Jul 21, after the closing bell.
Teradyne Inc. TER designs, develops, manufactures, sells and supports automatic test equipment worldwide. It operates through Semiconductor Test, System Test, Industrial Automation, and Wireless Test segments. Teradyne has an Earnings ESP of +14.01%.
The company has an expected earnings growth rate of 8.7% for the current year. The Zacks Consensus Estimate for the current year has improved by 1% over the last 7 days. It has a trailing four-quarter earnings surprise of 11%, on average. The company is set to release earnings results on Jul 21, after the closing bell.
Intel Corp. INTC provides computing, networking, data storage and communication solutions worldwide. It operates through Data Center Group, Internet of Things Group, Non-Volatile Memory Solutions Group, Programmable Solutions Group, Client Computing Group and All Other segments. The company has an Earnings ESP of +3.13%.
The Zacks Consensus Estimate for Intel's current-year earnings has improved 0.2% over the last 7 days. It has a trailing four-quarter earnings surprise of 17.4%, on average. The company is set to release earnings results on Jul 23, after the closing bell.
MaxLinear Inc. MXL provides radio-frequency, high-performance analog and mixed-signal communications systems-on-chip solutions for the connected home, wired and wireless infrastructure, and industrial and multi-market applications worldwide. The company has an Earnings ESP of +9.57%.
The Zacks Consensus Estimate for MaxLinear's current-year earnings has improved 11.9% over the last 30 days. It has a trailing four-quarter earnings surprise of 3.57%, on average. The company is set to release earnings results on Jul 23, after the closing bell.
NXP Semiconductors N.V. NXPI designs and manufactures high-performance, mixed-signal semiconductor solutions to meet the requirements of systems and sub-systems in its target markets. The company has an Earnings ESP of +11.90%.
The Zacks Consensus Estimate for NXP Semiconductors' current-year earnings has improved 0.6% over the last 30 days. It has a trailing four-quarter earnings surprise of 30%, on average. The company is set to release earnings results on Jul 27, after the closing bell.
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Intel Corporation (INTC): Free Stock Analysis Report
Texas Instruments Incorporated (TXN): Free Stock Analysis Report
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Teradyne, Inc. (TER): Free Stock Analysis Report
MaxLinear, Inc (MXL): Free Stock Analysis Report
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