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.

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 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.

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 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 Monolithic Power?

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. Monolithic Power (MPWR) earns a #3 (Hold) right now and its Most Accurate Estimate sits at $4.01 a share, just 29 days from its upcoming earnings release on May 7, 2025.

Monolithic Power's Earnings ESP sits at +0.29%, which, as explained above, is calculated by taking the percentage difference between the $4.01 Most Accurate Estimate and the Zacks Consensus Estimate of $4. MPWR 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.

MPWR is just one of a large group of Computer and Technology stocks with a positive ESP figure. Verizon Communications (VZ) is another qualifying stock you may want to consider.

Slated to report earnings on April 22, 2025, Verizon Communications holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is $1.16 a share 14 days from its next quarterly update.

The Zacks Consensus Estimate for Verizon Communications is $1.14, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +0.98%.

MPWR and VZ'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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