Want Better Returns? Don't Ignore These 2 Computer and Technology Stocks Set to Beat Earnings

Two factors often determine stock prices in the long run: earnings and interest rates. Investors can't control the latter, but they can focus on a company's earnings results every quarter.

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.

The ability to identify stocks that are likely to top quarterly earnings expectations can be profitable, but it's no simple task. Here at Zacks, our Earnings ESP filter helps make things easier.

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.

Now that we understand the basic idea, let's look at how the Expected Surprise Prediction works. The ESP is calculated by comparing the Most Accurate Estimate to the Zacks Consensus Estimate, with the percentage difference between the two giving us the Zacks ESP figure.

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 ranking of #3 (Hold), or 60% of all stocks covered by the Zacks Rank, are expected to perform in-line with the broader market. Stocks with rankings of #2 (Buy) and #1 (Strong Buy), 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 Twilio?

Now that we understand what the ESP is and how beneficial it can be, let's dive into a stock that currently fits the bill. Twilio (TWLO) earns a #3 (Hold) right now and its Most Accurate Estimate sits at $1.04 a share, just 27 days from its upcoming earnings release on August 7, 2025.

Twilio's Earnings ESP sits at +1.76%, which, as explained above, is calculated by taking the percentage difference between the $1.04 Most Accurate Estimate and the Zacks Consensus Estimate of $1.02. TWLO is also part of a large group of stocks that boast a positive ESP. Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they've reported.

TWLO is just one of a large group of Computer and Technology stocks with a positive ESP figure. Badger Meter (BMI) is another qualifying stock you may want to consider.

Slated to report earnings on July 22, 2025, Badger Meter holds a #3 (Hold) ranking on the Zacks Rank, and its Most Accurate Estimate is $1.28 a share 11 days from its next quarterly update.

The Zacks Consensus Estimate for Badger Meter is $1.21, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +5.61%.

TWLO and BMI's positive ESP metrics may signal that a positive earnings surprise for both stocks is on the horizon.

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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This article originally published on Zacks Investment Research (zacks.com).

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