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4 Tech Stocks Likely to Outpace Estimates This Earnings Season
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The July-September 2023 quarter earnings season for the Zacks Computer and Technology sector has been relatively modest so far than what the market had expected earlier.
Most companies in the space beat consensus EPS and revenue estimates, backed by accelerated digital transformation initiatives and strong IT spending. However, continued supply-chain disruptions, inflationary pressure and labor market constraints hurt the top and bottom-line growth of tech companies.
Per the latest Earnings Trends report, as of Nov 1, 53.3% of the tech companies in the S&P 500 list, constituting nearly 56.4% of the sector’s market capitalization, reported earnings. Total earnings of these tech companies were up 20.8% from the same period last year on 4.3% higher revenues, with 90% beating EPS estimates and 65% beating revenue estimates.
Overall, third-quarter earnings of the Computer and Technology sector are expected to grow 18.9% on 3.9% higher revenues compared with earnings growth of 4.9% on 1.7% higher revenues in the prior year period. The tech sector’s growth pace is expected to continue.
Earnings of the Big 7 Tech Players — Microsoft, Alphabet, Meta, Nvidia, Apple, Tesla, and Amazon — are expected to be up 49% from the same period last year on 12.1% higher revenues.
Zeroing in on Winners
As the third-quarter earnings season is drawing to a close, a few tech companies are yet to report their quarterly figures. Here, with the help of the Zacks proprietary methodology, we have highlighted four tech stocks — Wix.com (WIX - Free Report) , Dell Technologies (DELL - Free Report) , Keysight Technologies (KEYS - Free Report) and 2U (TWOU - Free Report) — that are expected to deliver a beat in their upcoming quarterly results.
With the presence of several industry participants, finding the right tech stocks with the potential to beat on earnings can be daunting. Our proprietary methodology, however, makes this task fairly simple.
You could narrow down your choices by looking at stocks that have the perfect combination of two key elements: a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold).
Earnings ESP is our proprietary methodology for determining stocks that have maximum chances of beating estimates in their next earnings announcement. It is the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Our research shows that for stocks with this favorable mix of ingredients, the odds of a positive earnings surprise are as high as 70%.
WIX’s third-quarter performance is likely to have benefited from strong bookings growth and an improvement in the user base. This apart, its focus on converting new users to paid subscribers, coupled with strong customer retention and increasing average revenue per subscription, is anticipated to have boosted third-quarter performance. The robust uptake of AI Text Creator as well as Wix Editor and other new e-commerce applications, is likely to drive its results.
AI Text Creator enables Wix Editor users to create, manage and grow their online presence with quality site content. The company’s cost reduction initiative is expected to have cushioned its margin performance. WIX expects annual recurring revenues to be driven by incremental subscriptions from the ramping up of its Partners business on its core Self Creators base.
The Zacks Consensus Estimate for earnings has risen 5.5% to 77 cents per share in the past 30 days.
Dell Technologies is slated to report third-quarter fiscal 2024 results on Nov 30. The company currently has an Earnings ESP of +0.80% and sports a Zacks Rank #1.
The company is expanding its Generative AI solutions portfolio, which is expected to have accelerated top-line growth in the to-be-reported quarter. Dell’s latest security services and solutions are expected to have helped enterprises protect their systems from threats, respond to attacks and secure their devices, systems and clouds. It is expanding the capabilities of Managed Detection and Response solutions with the latest Pro Plus, which is a fully managed security operations solution. For the third quarter of fiscal 2024, DELL expects total revenues between $22.5 million and $23.5 billion, with a midpoint of $23 billion.
The Zacks Consensus Estimate for earnings has increased by a penny to $1.47 per share in the past 30 days.
Keysight Technologies is slated to report fourth-quarter fiscal 2024 results on Nov 20. The company currently has an Earnings ESP of +0.18% and a Zacks Rank #3.
The company’s top line is expected to have benefited from steady demand for electronic design and test solutions. Its approach of collaborating with leading organizations to accelerate innovation and strategic buyouts is strengthening its portfolio and is likely to have supported the top line during the quarter. Keysight has been gaining traction with strong industry-wide growth. It is witnessing solid adoption of its electronic design and test solutions. Electronic devices form the fulcrum of IoT services, wireless devices, data centers and 5G technologies. The rapid adoption of these devices has been increasing demand for electronics testing equipment.
The Zacks Consensus Estimate for earnings has remained steady at $1.87 per share in the past 30 days.
2U is slated to report third-quarter results on Nov 9. The company currently has an Earnings ESP of +91.07% and carries a Zacks Rank #3.
2U has established significant partnerships with the likes of the University of Cape Town, The Raspberry Pi Foundation and Tel Aviv University among others. These partnerships are expected to have boosted the average program revenues in the third quarter. By continuing to invest in educational opportunities that focus on future job skills, the company empowers individuals to adapt to evolving job markets, stimulate economic growth and create a more inclusive and prosperous future for everyone. These efforts are expected to have boosted alternative credential revenues in the to-be-reported quarter.
The Zacks Consensus Estimate for loss has narrowed by a penny to 11 cents per share in the past 30 days.
Image: Bigstock
4 Tech Stocks Likely to Outpace Estimates This Earnings Season
The July-September 2023 quarter earnings season for the Zacks Computer and Technology sector has been relatively modest so far than what the market had expected earlier.
Most companies in the space beat consensus EPS and revenue estimates, backed by accelerated digital transformation initiatives and strong IT spending. However, continued supply-chain disruptions, inflationary pressure and labor market constraints hurt the top and bottom-line growth of tech companies.
Per the latest Earnings Trends report, as of Nov 1, 53.3% of the tech companies in the S&P 500 list, constituting nearly 56.4% of the sector’s market capitalization, reported earnings. Total earnings of these tech companies were up 20.8% from the same period last year on 4.3% higher revenues, with 90% beating EPS estimates and 65% beating revenue estimates.
Overall, third-quarter earnings of the Computer and Technology sector are expected to grow 18.9% on 3.9% higher revenues compared with earnings growth of 4.9% on 1.7% higher revenues in the prior year period. The tech sector’s growth pace is expected to continue.
Earnings of the Big 7 Tech Players — Microsoft, Alphabet, Meta, Nvidia, Apple, Tesla, and Amazon — are expected to be up 49% from the same period last year on 12.1% higher revenues.
Zeroing in on Winners
As the third-quarter earnings season is drawing to a close, a few tech companies are yet to report their quarterly figures. Here, with the help of the Zacks proprietary methodology, we have highlighted four tech stocks — Wix.com (WIX - Free Report) , Dell Technologies (DELL - Free Report) , Keysight Technologies (KEYS - Free Report) and 2U (TWOU - Free Report) — that are expected to deliver a beat in their upcoming quarterly results.
With the presence of several industry participants, finding the right tech stocks with the potential to beat on earnings can be daunting. Our proprietary methodology, however, makes this task fairly simple.
You could narrow down your choices by looking at stocks that have the perfect combination of two key elements: a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold).
Earnings ESP is our proprietary methodology for determining stocks that have maximum chances of beating estimates in their next earnings announcement. It is the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Our research shows that for stocks with this favorable mix of ingredients, the odds of a positive earnings surprise are as high as 70%.
4 Tech Stocks That Match the Criteria
Wix.com is slated to report third-quarter results on Nov 9. The company currently has an Earnings ESP of +20.19% and sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
WIX’s third-quarter performance is likely to have benefited from strong bookings growth and an improvement in the user base. This apart, its focus on converting new users to paid subscribers, coupled with strong customer retention and increasing average revenue per subscription, is anticipated to have boosted third-quarter performance. The robust uptake of AI Text Creator as well as Wix Editor and other new e-commerce applications, is likely to drive its results.
AI Text Creator enables Wix Editor users to create, manage and grow their online presence with quality site content. The company’s cost reduction initiative is expected to have cushioned its margin performance. WIX expects annual recurring revenues to be driven by incremental subscriptions from the ramping up of its Partners business on its core Self Creators base.
The Zacks Consensus Estimate for earnings has risen 5.5% to 77 cents per share in the past 30 days.
Wix.com Ltd. Price and EPS Surprise
Wix.com Ltd. price-eps-surprise | Wix.com Ltd. Quote
Dell Technologies is slated to report third-quarter fiscal 2024 results on Nov 30. The company currently has an Earnings ESP of +0.80% and sports a Zacks Rank #1.
The company is expanding its Generative AI solutions portfolio, which is expected to have accelerated top-line growth in the to-be-reported quarter. Dell’s latest security services and solutions are expected to have helped enterprises protect their systems from threats, respond to attacks and secure their devices, systems and clouds. It is expanding the capabilities of Managed Detection and Response solutions with the latest Pro Plus, which is a fully managed security operations solution. For the third quarter of fiscal 2024, DELL expects total revenues between $22.5 million and $23.5 billion, with a midpoint of $23 billion.
The Zacks Consensus Estimate for earnings has increased by a penny to $1.47 per share in the past 30 days.
Dell Technologies Inc. Price and EPS Surprise
Dell Technologies Inc. price-eps-surprise | Dell Technologies Inc. Quote
Keysight Technologies is slated to report fourth-quarter fiscal 2024 results on Nov 20. The company currently has an Earnings ESP of +0.18% and a Zacks Rank #3.
The company’s top line is expected to have benefited from steady demand for electronic design and test solutions. Its approach of collaborating with leading organizations to accelerate innovation and strategic buyouts is strengthening its portfolio and is likely to have supported the top line during the quarter. Keysight has been gaining traction with strong industry-wide growth. It is witnessing solid adoption of its electronic design and test solutions. Electronic devices form the fulcrum of IoT services, wireless devices, data centers and 5G technologies. The rapid adoption of these devices has been increasing demand for electronics testing equipment.
The Zacks Consensus Estimate for earnings has remained steady at $1.87 per share in the past 30 days.
Keysight Technologies Inc. Price and EPS Surprise
Keysight Technologies Inc. price-eps-surprise | Keysight Technologies Inc. Quote
2U is slated to report third-quarter results on Nov 9. The company currently has an Earnings ESP of +91.07% and carries a Zacks Rank #3.
2U has established significant partnerships with the likes of the University of Cape Town, The Raspberry Pi Foundation and Tel Aviv University among others. These partnerships are expected to have boosted the average program revenues in the third quarter. By continuing to invest in educational opportunities that focus on future job skills, the company empowers individuals to adapt to evolving job markets, stimulate economic growth and create a more inclusive and prosperous future for everyone. These efforts are expected to have boosted alternative credential revenues in the to-be-reported quarter.
The Zacks Consensus Estimate for loss has narrowed by a penny to 11 cents per share in the past 30 days.
2U, Inc. Price and EPS Surprise
2U, Inc. price-eps-surprise | 2U, Inc. Quote