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Why Investors Need to Take Advantage of These 2 Computer and Technology Stocks Now

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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.

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 Expected Surprise Prediction, or ESP, works by locking in on the most up-to-date analyst earnings revisions because they can be more accurate than estimates from weeks or even months before the actual release date. The thinking is pretty straightforward: analysts who provide earnings estimates closer to the report are likely to have more information.

The core of the ESP model is comparing the Most Accurate Estimate to the Zacks Consensus Estimate, where the resulting percentage difference between the two equals the Expected Surprise Prediction. The Zacks Rank is also factored into the ESP metric to better help find companies that appear poised to top their next bottom-line consensus estimate, which will hopefully help lift the stock price.

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

Most stocks, about 60%, fall into the #3 (Hold) category, and they are expected to perform in-line with the broader market. Stocks with a #2 (Buy) and #1 (Strong Buy) rating, or the top 15% and top 5% of stocks, respectively, should outperform the market, with Strong Buy stocks outperforming more than any other rank.

Should You Consider Apple?

The last thing we will do today, now that we have a grasp on the ESP and how powerful of a tool it can be, is to quickly look at a qualifying stock. Apple (AAPL - Free Report) holds a #2 (Buy) at the moment and its Most Accurate Estimate comes in at $1.38 a share six days away from its upcoming earnings release on August 1, 2024.

By taking the percentage difference between the $1.38 Most Accurate Estimate and the $1.34 Zacks Consensus Estimate, Apple has an Earnings ESP of +3.05%. Investors should also know that AAPL 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.

AAPL is one of just a large database of Computer and Technology stocks with positive ESPs. Another solid-looking stock is IBM (IBM - Free Report) .

Slated to report earnings on October 23, 2024, IBM holds a #2 (Buy) ranking on the Zacks Rank, and it's Most Accurate Estimate is $2.23 a share 89 days from its next quarterly update.

For IBM, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $2.22 is +0.28%.

Because both stocks hold a positive Earnings ESP, AAPL and IBM could potentially post earnings beats in their next reports.

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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Apple Inc. (AAPL) - free report >>

International Business Machines Corporation (IBM) - free report >>

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