Looking for Stocks with Positive Earnings Momentum? Check Out These 2 Computer and Technology Names

Zacks Investment Research promotes its Earnings ESP (Expected Surprise Prediction) tool, designed to forecast earnings surprises by comparing the Most Accurate Estimate to the Zacks Consensus Estimate. The firm highlights that combining a positive ESP with a Zacks Rank #3 (Hold) or better has historically predicted positive earnings surprises 70% of the time and generated an average annual return of 28.3% over a 10-year backtest. This methodology identifies companies like Monday.com (MNDY) with a +5.08% ESP and T-Mobile (TMUS) with a +0.75% ESP, suggesting a high probability of these stocks beating upcoming earnings estimates and offering a strategy for profitable earnings season trading.

Analysis

The Zacks Earnings Expected Surprise Prediction (ESP) model identifies stocks with a heightened probability of surpassing consensus earnings estimates, a key driver of near-term price momentum. According to the firm's 10-year backtest, combining a positive ESP with a Zacks Rank of #3 (Hold) or better has historically resulted in a positive earnings surprise 70% of the time, generating average annual returns of 28.3%. The analysis highlights two technology sector names meeting these criteria. Monday.com (MNDY) presents a compelling near-term signal with a Zacks Rank #3 and a significant positive ESP of +5.08%, calculated from its Most Accurate Estimate of $0.89 versus a consensus of $0.84, just 11 days before its next earnings report. T-Mobile (TMUS) also qualifies with a Zacks Rank #3, but its signal is less pronounced with a modest +0.75% ESP ($2.75 Most Accurate vs. $2.73 Consensus) and a more distant earnings date 83 days out. The data suggests both companies are positioned to potentially beat expectations, but the quantitative signal for an imminent positive surprise is substantially stronger for MNDY.

Key Decisions for Investors

• Investors with a higher risk tolerance for event-driven strategies may consider establishing a tactical long position in Monday.com (MNDY) ahead of its earnings release, given its strong +5.08% ESP and the model's 70% historical success rate for predicting positive surprises.
• For T-Mobile (TMUS), the positive but marginal ESP of +0.75% and distant reporting date suggest a 'watch and wait' approach; investors should monitor analyst estimate revisions closer to the October 22 report date to see if the signal strengthens.
• While the backtested returns are notable, this strategy is probabilistic and should be used to identify potential short-term catalysts rather than as a sole basis for long-term investment, complementing fundamental analysis.