These 2 Computer and Technology Stocks Could Beat Earnings: Why They Should Be on Your Radar

Zacks Investment Research highlights its proprietary Earnings ESP (Expected Surprise Prediction) tool, designed to forecast positive earnings surprises by comparing the most accurate analyst estimates to the broader consensus. The system, when combined with a Zacks Rank #3 (Hold) or stronger, has historically identified stocks that beat earnings 70% of the time, yielding an average annual return of 28% over a 10-year backtest. Pure Storage (PSTG), with a +2.04% ESP, and Apple (AAPL), with a +1.90% ESP, are presented as current examples of technology stocks poised for potential earnings beats, signaling these companies as noteworthy for investors ahead of their respective reports.

Analysis

The analysis highlights a quantitative methodology, the Zacks Earnings Expected Surprise Prediction (ESP), which identifies potential earnings beats by comparing the most recent analyst estimates to the broader consensus. The model's historical performance, when combined with a Zacks Rank of #3 (Hold) or better, reportedly yields a 70% positive surprise rate and an average annual return of 28% over a 10-year backtest. Two technology stocks are identified as currently screening positive under this model. Pure Storage (PSTG) has a +2.04% ESP, with its Most Accurate Estimate of $0.40 per share exceeding the consensus of $0.39 just five days before its earnings release. Apple (AAPL) shows a similar, albeit less immediate, signal with a +1.90% ESP based on a Most Accurate Estimate of $1.76 versus a $1.73 consensus, though its report is 69 days out. Both companies currently hold a Zacks Rank #3 (Hold), suggesting they are expected to perform in-line with the market, but the positive ESP indicates a higher probability of exceeding near-term earnings expectations based on the most recent analyst revisions.

Key Decisions for Investors

• Investors employing event-driven strategies may consider the positive Earnings ESP for Pure Storage (PSTG) as a signal for a potential upside surprise, given the earnings report is imminent.
• For Apple (AAPL), the positive ESP signal is a point of interest, but its long lead time of 69 days suggests monitoring for any changes to analyst estimates is more prudent than immediate action.
• While the ESP metric is constructive, the Zacks Rank #3 (Hold) for both PSTG and AAPL implies neutral market performance, so any bullish positioning should be weighed against this broader expectation.
• Consider utilizing the referenced ESP filter as a screening tool to identify other companies with a high probability of an earnings beat, particularly those with a stronger Zacks Rank of #1 (Strong Buy) or #2 (Buy).