These 2 Computer and Technology Stocks Could Beat Earnings: Why They Should Be on Your Radar

Quarterly financial reports play a vital role on Wall Street, as they help investors see how a company has performed and what might be coming down the road in the near-term. And out of all of the metrics and results to consider, earnings is one of the most important.

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.

Now that we know how important earnings and earnings surprises are, it's time to show investors how to take advantage of these events to boost their returns by utilizing the Zacks Earnings ESP filter.

The Zacks Earnings ESP, Explained

The Zacks Earnings ESP is more formally known as the Expected Surprise Prediction, and it aims to grab the inside track on the latest analyst estimate revisions ahead of a company's report. The idea is relatively intuitive as a newer projection might be based on more complete information.

With this in mind, the Expected Surprise Prediction compares the Most Accurate Estimate (being the most recent) against the overall Zacks Consensus Estimate. The percentage difference provides the ESP figure. The system also utilizes our core Zacks Rank to provide a stronger system for identifying stocks that might beat their next quarterly earnings estimate and possibly see the stock price climb.

When we join a positive earnings ESP with a Zacks Rank #3 (Hold) or stronger, stocks posted a positive bottom-line surprise 70% of the time. Plus, this system saw investors produce roughly 28% annual returns on average, according to our 10 year backtest.

Most stocks, about 60%, fall into the #3 (Hold) category, and they are expected to perform in-line with the broader market. Stocks with a #2 (Buy) and #1 (Strong Buy) rating, or the top 15% and top 5% of stocks, respectively, should outperform the market, with Strong Buy stocks outperforming more than any other rank.

Should You Consider Arista Networks?

The last thing we will do today, now that we have a grasp on the ESP and how powerful of a tool it can be, is to quickly look at a qualifying stock. Arista Networks (ANET) holds a #2 (Buy) at the moment and its Most Accurate Estimate comes in at $1.81 a share one day away from its upcoming earnings release on May 7, 2024.

ANET has an Earnings ESP figure of +3.76%, which, as explained above, is calculated by taking the percentage difference between the $1.81 Most Accurate Estimate and the Zacks Consensus Estimate of $1.74. Arista Networks is one of a large database of stocks with positive ESPs. Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they've reported.

ANET is one of just a large database of Computer and Technology stocks with positive ESPs. Another solid-looking stock is Agilent Technologies (A).

Agilent Technologies, which is readying to report earnings on May 29, 2024, sits at a Zacks Rank #3 (Hold) right now. It's Most Accurate Estimate is currently $1.20 a share, and An is 23 days out from its next earnings report.

Agilent Technologies' Earnings ESP figure currently stands at +0.72% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $1.19.

Because both stocks hold a positive Earnings ESP, ANET and A could potentially post earnings beats in their next reports.

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 >>

Only $1 to See All Zacks' Buys and Sells

We're not kidding.

Several years ago, we shocked our members by offering them 30-day access to all our picks for the total sum of only $1. No obligation to spend another cent.

Thousands have taken advantage of this opportunity. Thousands did not - they thought there must be a catch. Yes, we do have a reason. We want you to get acquainted with our portfolio services like Surprise Trader, Stocks Under $10, Technology Innovators,and more, that closed 228 positions with double- and triple-digit gains in 2023 alone.

See Stocks Now >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Arista Networks, Inc. (ANET) : Free Stock Analysis Report

Agilent Technologies, Inc. (A) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

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

More Related Articles

Info icon

This data feed is not available at this time.

Sign up for the TradeTalks newsletter to receive your weekly dose of trading news, trends and education. Delivered Wednesdays.