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.

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.

Hunting for 'earnings whispers' or companies poised to beat their quarterly earnings estimates is a somewhat common practice. But that doesn't make it easy. One way that has been proven to work is by using the Zacks Earnings ESP tool.

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 #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 KLA?

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. KLA (KLAC) earns a #3 (Hold) right now and its Most Accurate Estimate sits at $8.08 a share, just 23 days from its upcoming earnings release on April 24, 2025.

KLA's Earnings ESP sits at +0.26%, which, as explained above, is calculated by taking the percentage difference between the $8.08 Most Accurate Estimate and the Zacks Consensus Estimate of $8.06. KLAC 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.

KLAC is one of just a large database of Computer and Technology stocks with positive ESPs. Another solid-looking stock is Advanced Micro Devices (AMD).

Slated to report earnings on April 29, 2025, Advanced Micro Devices holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is $0.95 a share 28 days from its next quarterly update.

Advanced Micro Devices' Earnings ESP figure currently stands at +2.01% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $0.93.

KLAC and AMD'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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