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.

Now that we know how important earnings and earnings surprises are, it's time to show investors how to take advantage of these events to boost their returns by utilizing the Zacks Earnings ESP filter.

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 #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 Western Digital?

The final step today is to look at a stock that meets our ESP qualifications. Western Digital (WDC) earns a #3 (Hold) 10 days from its next quarterly earnings release on April 24, 2025, and its Most Accurate Estimate comes in at $1.13 a share.

By taking the percentage difference between the $1.13 Most Accurate Estimate and the $1.06 Zacks Consensus Estimate, Western Digital has an Earnings ESP of +6.6%. Investors should also know that WDC is one of a large group 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.

WDC is one of just a large database of Computer and Technology stocks with positive ESPs. Another solid-looking stock is ASML (ASML).

Slated to report earnings on April 16, 2025, ASML holds a #2 (Buy) ranking on the Zacks Rank, and it's Most Accurate Estimate is $6.40 a share two days from its next quarterly update.

For ASML, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $6.12 is +4.58%.

WDC and ASML'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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