Want Better Returns? Don?t Ignore These 2 Computer and Technology Stocks Set to Beat Earnings

Earnings are arguably the most important single number on a company's quarterly financial report. Wall Street clearly dives into all of the other metrics and management's input, but the EPS figure helps cut through all the noise.

The earnings figure itself is key, of course, but a beat or miss on the bottom line can sometimes be just as, if not more, important. Therefore, investors should consider paying close attention to these earnings surprises, as a big beat can help a stock climb and vice versa.

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, or Expected Surprise Prediction, aims to find earnings surprises by focusing on the most recent analyst revisions. The basic premise is that if an analyst reevaluates their earnings estimate ahead of an earnings release, it means they likely have new information that could possibly be more accurate.

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.

Bringing together a positive earnings ESP alongside a Zacks Rank #3 (Hold) or better has helped stocks report a positive earnings surprise 70% of the time. Furthermore, by using these parameters, investors have seen 28.3% annual returns on average, according to our 10 year backtest.

Stocks with a #3 (Hold) ranking, which is most stocks covered at 60%, are expected to perform in-line with the broader market. But stocks that fall into the #2 (Buy) and #1 (Strong Buy) ranking, or the top 15% and top 5% of stocks, respectively, should outperform the market. Strong Buy stocks should outperform more than any other rank.

Should You Consider Agilent Technologies?

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. Agilent Technologies (A) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at $1.20 a share 29 days away from its upcoming earnings release on May 28, 2024.

By taking the percentage difference between the $1.20 Most Accurate Estimate and the $1.19 Zacks Consensus Estimate, Agilent Technologies has an Earnings ESP of +0.72%. Investors should also know that An is one of a large group 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.

An is just one of a large group of Computer and Technology stocks with a positive ESP figure. KLA (KLAC) is another qualifying stock you may want to consider.

Slated to report earnings on July 25, 2024, KLA holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is $5.78 a share 87 days from its next quarterly update.

For KLA, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $5.73 is +0.93%.

Because both stocks hold a positive Earnings ESP, An and KLAC 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 >>

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

KLA Corporation (KLAC) : Free Stock Analysis Report

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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.

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