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This 1 Computer and Technology Stock Could Beat Earnings: Why It Should Be on Your Radar

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Earnings are arguably the most important single number on a company's quarterly financial report. Wall Street clearly dives into all of the other metrics and management's input, but the EPS figure helps cut through all the noise.

We know earnings results are vital, but how a company performs compared to bottom line expectations can be even more important when it comes to stock prices, especially in the near-term. This means that investors might want to take advantage of these earnings surprises.

Now that we know how important earnings and earnings surprises are, it's time to show investors how to take advantage of these events to boost their returns by utilizing the Zacks Earnings ESP filter.

The Zacks Earnings ESP, Explained

The Zacks Earnings ESP is more formally known as the Expected Surprise Prediction, and it aims to grab the inside track on the latest analyst estimate revisions ahead of a company's report. The idea is relatively intuitive as a newer projection might be based on more complete information.

With this in mind, the Expected Surprise Prediction compares the Most Accurate Estimate (being the most recent) against the overall Zacks Consensus Estimate. The percentage difference provides the ESP figure. The system also utilizes our core Zacks Rank to provide a stronger system for identifying stocks that might beat their next quarterly earnings estimate and possibly see the stock price climb.

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 Salesforce.com?

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. Salesforce.com (CRM - Free Report) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at $1.30 a share 26 days away from its upcoming earnings release on November 29, 2022.

Salesforce.com's Earnings ESP sits at +7.13%, which, as explained above, is calculated by taking the percentage difference between the $1.30 Most Accurate Estimate and the Zacks Consensus Estimate of $1.21. CRM is also part of a large group of stocks that boast a positive ESP. Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they've reported.

CRM is just one of a large group of Computer and Technology stocks with a positive ESP figure. ON Semiconductor Corp. (ON - Free Report) is another qualifying stock you may want to consider.

ON Semiconductor Corp. is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on February 6, 2023. ON's Most Accurate Estimate sits at $1.27 a share 95 days from its next earnings release.

For ON Semiconductor Corp. the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $1.26 is +0.17%.

CRM and ON's positive ESP figures tell us that both stocks have a good chance at beating analyst expectations in their next earnings report.

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 >>


See More Zacks Research for These Tickers


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Salesforce Inc. (CRM) - free report >>

ON Semiconductor Corporation (ON) - free report >>

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