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Tech Stocks' Earnings on Feb 7: AKAM, CDW, SABR, UTI, ZG

The fourth quarter earnings season is peaking at a moment when majority of the S&P 500 members are set to complete reporting by the end of this week (71.8% of the index's total membership). As per the latest Earnings Preview report, as of Feb 3, 275 S&P 500 members representing 55% of the index's total market capitalization have already reported quarterly numbers.

Total earnings of these companies are up +6.9% on a year-over-year basis (68% of the companies beat EPS estimates) while total revenue is up +4.2% on a year-over-year basis (54.5% of the companies beat top-line estimates).

Overall fourth-quarter earnings for S&P 500 companies are anticipated to be up +6.8% from the year-ago quarter on revenues that are estimated to increase +3.9%. This would be better than +3.7% growth in third-quarter earnings on +2.2% higher revenues driven by robust performance from Finance, Construction, Technology, and Basic Materials sectors.

Notably, technology stocks representing 84% of the total market capital has already reported. Total earnings for these companies are up +7.4% from the same period last year on +5.4% higher revenues, with 71.1% beating EPS estimates and 78.9% beating revenue estimates. This is better earnings growth compared with the third quarter or the preceding four quarters.

The current week (Feb 6-10) will see releases from 500 companies, out of which 84 companies are S&P 500 members. Notable technology companies include Twitter and NVIDIA among others.

Here we take a look at five technology companies that are set to report their fourth-quarter 2016 earnings on Feb 7. However, none of them is likely to beat expectations. This is because, as per our proven model, a stock needs to have both a positive Earnings ESP and a Zacks Rank #1(Strong Buy), 2 (Buy) or 3 (Hold) to beat earnings.

You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Akamai Technologies Inc.AKAM has an Earnings ESP of 0.00% and a Zacks Rank #3. The company expects revenues in a range of $593-$613 million. Non-GAAP earnings are projected in the range of $0.65-$0.70 per share. (Read More: What's in the Cards for Akamai this Earnings Season? )

We also note that Akamai's results compared favorably with the Zacks Consensus Estimate in three of the last four quarters, resulting in an average positive surprise of 2.51%. Moreover, shares (up 69.7%) have outperformed the Zacks Internet Services industry (up 49.7%) in the last one year.

Akamai Technologies, Inc. Price and EPS Surprise

Akamai Technologies, Inc. Price and EPS Surprise | Akamai Technologies, Inc. Quote

CDW CorporationCDW has also beaten the Zacks Consensus Estimates in three of the last four quarters. We believe that growth in customer channels and consistent strategic achievements are a couple of positive factors that should drive this Zacks Rank #3 stock's performance in the soon-to-be reported quarter.

Additionally, CDW's robust product portfolio and product refreshes are positives. Moreover, the company has outperformed the Zacks IT Services industry in the past one year. While the stock has gained 50.9%, the industry posted a return of 25.5% in the same period. (Read More: CDW Corp. Q4 Earnings: What's in the Cards this Time? )

CDW Corporation Price and EPS Surprise

CDW Corporation Price and EPS Surprise | CDW Corporation Quote

Sabre CorporationSABR carries a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here . However, Earnings ESP of 0.00% makes surprise prediction difficult for us. We also note that the company has missed the Zacks Consensus Estimate in the last quarter. The company has an average four-quarter negative surprise of 3.42%.

Moreover, the company has underperformed the Zacks Internet Software and Services industry in the past one year. While the stock has gained 7.5%, the industry posted a return of 40.5% in same time frame.

Sabre Corporation Price and EPS Surprise

Sabre Corporation Price and EPS Surprise | Sabre Corporation Quote

The Ultimate Software Group Inc.ULTI also has an Earnings ESP of 0.00% and a Zacks Rank #3. Further, the company has missed the Zacks Consensus Estimate in three out of four preceding quarters, with an average four-quarter negative surprise of 63.45%.

Moreover, the company has underperformed the Zacks Computer Software industry in the past one year. While the stock has gained 26.2%, the industry posted a return of 30.7% in the same period.

The Ultimate Software Group, Inc. Price and EPS Surprise

The Ultimate Software Group, Inc. Price and EPS Surprise | The Ultimate Software Group, Inc. Quote

Similarly, Zillow Group Inc.ZG carries an Earnings ESP of 0.00% and a Zacks Rank #3. We note that the company delivered negative earnings surprises in two of the last four quarters, with an average negative earnings surprise of 49.78%.

For fourth-quarter 2016, management expects revenues in a range of $218-$233 million. However, macroeconomic factors, a competitive landscape and increasing mortgage interest rates remain concerns for the company may weigh on its performance in the soon-to-be reported quarter. (Read More: What's in the Cards for Zillow Group in Q4 Earnings? )

Zillow Group, Inc. Price and EPS Surprise

Zillow Group, Inc. Price and EPS Surprise | Zillow Group, Inc. Quote

Despite the modest expectations we note that shares of Zillow have outperformed the broader Zacks Internet Services industry over the last one year. While the industry gained 17.4%, the stock gained a massive 113.4% in the same period.

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Akamai Technologies, Inc. (AKAM): Free Stock Analysis Report

Sabre Corporation (SABR): Free Stock Analysis Report

The Ultimate Software Group, Inc. (ULTI): Free Stock Analysis Report

Zillow Group, Inc. (ZG): Free Stock Analysis Report

CDW Corporation (CDW): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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