How to Find Strong Computer and Technology Stocks Slated for Positive Earnings Surprises

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.

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, 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.

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 Cisco Systems?

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. Cisco Systems (CSCO) earns a #3 (Hold) right now and its Most Accurate Estimate sits at $0.98 a share, just 27 days from its upcoming earnings release on August 13, 2025.

CSCO has an Earnings ESP figure of +0.69%, which, as explained above, is calculated by taking the percentage difference between the $0.98 Most Accurate Estimate and the Zacks Consensus Estimate of $0.97. Cisco Systems 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.

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

Leidos is a Zacks Rank #2 (Buy) stock, and is getting ready to report earnings on August 5, 2025. LDOS' Most Accurate Estimate sits at $2.63 a share 19 days from its next earnings release.

The Zacks Consensus Estimate for Leidos is $2.61, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +0.65%.

CSCO and LDOS' 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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