How to Find Strong Computer and Technology Stocks Slated for Positive Earnings Surprises

Zacks Investment Research highlights the Earnings ESP (Expected Surprise Prediction) filter as a tool for identifying stocks likely to beat earnings expectations, noting a historical 70% success rate and 28.3% average annual returns using a combination of positive ESP and a Zacks Rank #3 (Hold) or better. Broadcom Inc. (AVGO), with a Zacks Rank #2 (Buy) and an ESP of +1.27%, and Salesforce.com (CRM), with a Zacks Rank #3 (Hold) and an ESP of +1.59%, are presented as examples of stocks with positive ESPs, potentially signaling upcoming positive earnings surprises.

Analysis

Zacks Investment Research details its Earnings ESP (Expected Surprise Prediction) model, which aims to predict earnings surprises by comparing the 'Most Accurate Estimate' from recent analyst revisions to the 'Zacks Consensus Estimate.' The firm states that a positive ESP combined with a Zacks Rank #3 (Hold) or better has historically yielded positive earnings surprises 70% of the time, with an associated average annual return of 28.3% over a 10-year backtest. Broadcom Inc. (AVGO), a semiconductor company, is highlighted with a Zacks Rank #2 (Buy) and an Earnings ESP of +1.27%, based on its Most Accurate Estimate of $1.59 versus a consensus of $1.57, three days before its June 5, 2025, earnings release; a #2 rank implies expected market outperformance, potentially supported by strong projected growth in the global semiconductor market, which is forecast to expand from $452 billion in 2021 to $803 billion by 2028. Salesforce.com (CRM) is also presented as a qualifying stock with a Zacks Rank #3 (Hold) and an Earnings ESP of +1.59% (Most Accurate Estimate $2.77 versus consensus $2.73), 86 days prior to its August 27, 2025, earnings report; a #3 rank suggests expected in-line market performance. The positive ESPs for both AVGO and CRM are presented as indicators of potential upcoming positive earnings surprises.

Key Decisions for Investors

• Evaluate the Zacks Earnings ESP methodology for its potential to identify stocks poised for positive earnings surprises, noting its historical 70% success rate and 28.3% average annual return when combined with a Zacks Rank of #3 or better.
• Closely monitor Broadcom (AVGO) ahead of its June 5, 2025, earnings, as its #2 (Buy) rank and +1.27% ESP suggest a strong likelihood of an earnings beat and potential outperformance, especially considering the favorable semiconductor industry outlook.
• For Salesforce (CRM), its +1.59% ESP indicates a possible earnings beat; however, its #3 (Hold) rank, implying in-line market performance, warrants careful consideration alongside other fundamental factors before its August 27, 2025, report.
• Use the ESP filter judiciously as a screening tool for identifying potential earnings surprise candidates, particularly in the technology sector, always complementing its outputs with comprehensive due diligence and risk assessment specific to each security.