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This 1 Computer and Technology Stock Could Beat Earnings: Why It Should Be on Your Radar


QFinancial reports later played an important role on Wall Street, as they helped investors see how a company was doing and what might happen in the near future. And of all the metrics and results to consider, revenue is one of the most important.

The revenue number 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 attention to these earnings surprises, because a big beat can help the stock rise 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 increase their returns by using the Zacks Earnings ESP filter.

The Zacks Earnings ESP, Explained

Zacks Earnings ESP, or Expected Surprise Prediction, aims to find earnings surprises by focusing on the latest analyst revisions. The basic premise is that if an analyst re-evaluates their earnings estimate before the earnings release, it means they likely have new information that is potentially more accurate.

The core of the ESP model is the comparison of the Most Accurate Estimate with the Zacks Consensus Estimate, where the resulting percentage difference between the two equals the Expected Surprise Prediction. The Zacks Rank is also included in the ESP metric to better help find companies that look poised to top their next consensus estimate below, which is expected to help boost the stock price.

In fact, when we combine a Zacks Rank #3 (Hold) or better and a positive Earnings ESP, stocks make a positive surprise 70% of the time. Perhaps most importantly, using these parameters helped create 28.3% annual returns on average, according to our 10-year backtest.

Stocks with a #3 (Hold) ranking, which are 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) ranks, or the top 15% and top 5% of stocks, respectively, should outperform the market. Strong Buy stocks should top all rankings.

Should You Consider Advanced Micro Devices?

Now that we know what ESP is and how useful it is, let’s examine a stock that currently fits the bill. Advanced Micro Devices (AMD) earned a #3 (Hold) today and its Best Estimate sits at $1.05 per share, just four days from its upcoming earnings release on August 2, 2022.

Advanced Micro Devices’ Earnings ESP sits at +1.66%, which, as explained above, is calculated by taking the percentage difference between the $1.05 Most Accurate Estimate and the Zacks Consensus Estimate of $1.03. AMD is also part of a large group of stocks that boast a positive ESP. Be sure to use our Earnings ESP Filter to identify the best stocks to buy or sell before reporting them.

AMD is part of a large group of Computer and Technology stocks that boast a positive ESP, and investors may want to take a look at Atlassian (TEAM) as well.

Atlassian is a Zacks Rank #3 (Hold) stock, and is set to report earnings on August 4, 2022. TEAM’s Best Estimate is $0.27 per share six days from the next earnings release.

For Atlassian, the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate of $0.26 is +1.92%.

Since both stocks have positive Earnings ESP, AMD and TEAM may post earnings beats in their next reports.

Find Stocks to Buy or Sell Before They Report

Use the Zacks Earnings ESP Filter to display stocks with the highest probability of positive, or negative, surprise buy or sell before they are reported for earnings during the trading period. Check it out here >>

7 Best Stocks for the Next 30 Days

Just released: Experts eliminate 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They consider these tickers “Most Likely for Early Price Pops.”

Since 1988, the entire list has beaten the market more than 2X with an average gain of +24.8% per year. So be sure to give these picks your own attention.

Check them out now >>

Click to get this free report

Advanced Micro Devices, Inc. (AMD): Free Stock Analysis Report

Atlassian Corporation PLC (TEAM): Free Stock Analysis Report

To read this Zacks.com article click here.

Zacks Investment Research

The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.



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