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

The article details the Zacks Earnings ESP (Expected Surprise Prediction) tool, a methodology designed to identify stocks likely to beat quarterly earnings estimates by comparing the Most Accurate Estimate to the Zacks Consensus Estimate. Historically, a positive ESP combined with a Zacks Rank #3 (Hold) or stronger has predicted positive bottom-line surprises 70% of the time, yielding an average annual return of 28% over a 10-year backtest. Currently, Nutanix (NTNX) and Lam Research (LRCX) are highlighted as computer and technology stocks exhibiting positive ESPs, suggesting their potential for upcoming earnings beats and offering a systematic approach for investors seeking earnings season trading opportunities.

Analysis

The Zacks Earnings ESP (Expected Surprise Prediction) model is highlighted as a quantitative tool for identifying potential earnings beats by measuring the divergence between recent analyst estimates and the broader consensus. According to the article's back-testing, a positive ESP combined with a Zacks Rank of #3 (Hold) or stronger has historically predicted a positive earnings surprise 70% of the time, a strategy that purportedly generated average annual returns of 28%. Two technology stocks currently fit this model: Nutanix (NTNX) and Lam Research (LRCX). Nutanix presents a particularly strong signal with a positive ESP of +18.49%, based on its Most Accurate Estimate of $0.38 versus a consensus of $0.32, with its earnings report just six days away. Lam Research also qualifies with a positive ESP of +2.14% ($1.22 vs. $1.19), though its earnings release is further out at 62 days. Both entities hold a #3 (Hold) rating, indicating they are expected to perform in-line with the market, framing the potential opportunity as a short-term, event-driven catalyst rather than a long-term fundamental outperformance story.

Key Decisions for Investors

• Investors could utilize the Zacks ESP model as a quantitative screen to identify tactical, short-term trading opportunities ahead of corporate earnings announcements, focusing on stocks with a positive ESP and a Zacks Rank of #3 or better.
• Given its significant +18.49% ESP and imminent earnings report, Nutanix (NTNX) presents a potential short-term catalyst, and investors might consider a bullish position to capitalize on the high probability of an earnings beat.
• For Lam Research (LRCX), the positive but smaller ESP and longer timeframe to its report suggest a watch-list approach is more prudent, while noting the #3 'Hold' rating on both stocks frames this as an event-driven trade rather than a fundamental long-term conviction.