Why Investors Need to Take Advantage of These 2 Computer and Technology Stocks Now

Wall Street watches a company's quarterly report closely to understand as much as possible about its recent performance and what to expect going forward. Of course, one figure often stands out among the rest: earnings.

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.

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.

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.

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 ServiceNow?

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. ServiceNow (NOW) holds a #2 (Buy) at the moment and its Most Accurate Estimate comes in at $3.61 a share eight days away from its upcoming earnings release on July 23, 2025.

NOW has an Earnings ESP figure of +2.11%, which, as explained above, is calculated by taking the percentage difference between the $3.61 Most Accurate Estimate and the Zacks Consensus Estimate of $3.54. ServiceNow 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.

NOW is part of a big group of Computer and Technology stocks that boast a positive ESP, and investors may want to take a look at Analog Devices (ADI) as well.

Slated to report earnings on August 20, 2025, Analog Devices holds a #3 (Hold) ranking on the Zacks Rank, and its Most Accurate Estimate is $1.94 a share 36 days from its next quarterly update.

Analog Devices' Earnings ESP figure currently stands at +0.72% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $1.93.

NOW and ADI's positive ESP figures tell us that both stocks have a good chance at beating analyst expectations in their next earnings report.

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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