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6 Technology Stocks Likely To Beat Q1 Earnings

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The Computer and Technology sector has consistently outperformed the S&P 500 in recent months, appreciating 8.7% in the last six months compared to the S&P 500’s 5.1%.

Moreover, a closer look at the sectors expected performance for the to-be-reported quarter as compared with its performance to date shows improving prospects: the EPS is expected to grow 3.7% this quarter compared to 2.24% growth for the trailing twelve month period ended September 2016. Revenue expectations are also positive: the sector will grow revenue 3.5% this quarter compared to the trailing twelve month growth of -0.8%.

This is partly because of modest improvement in parts of the PC segment. It’s also because of the growing adoption of cloud computing, cloud infrastructure build-out, networking innovations, corporate focus on security, smartphone adoption in emerging markets, VR/AR devices coming to market, the proliferation of wearables and other IoT in the home, office, car and every other conceivable place, as well as increased automation on the factory floor.

The size of the market continues to grow and scope of technological innovations continues to expand. Huge marketing budgets add to the hype making it that much harder to put your finger on the stocks that can make a difference to your earnings.

That’s where Zacks methodology can help-

Based on the premise that share prices will appreciate in response to an earnings beat we can try to identify those stocks with a strong likelihood of beating estimates going into the earnings announcement. To determine these winners, Zacks methodology requires us to choose stocks with a favorable Zacks Rank: Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) that also have a positive Earnings ESP.

Earnings ESP is our proprietary methodology for identifying stocks that have high chances of surprising in their next earnings announcement. It shows the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate.

Earnings ESP FilterOur research shows that for stocks with this combination, the chance of a positive earnings surprise is as high as 70%. You can uncover the best stocks to buy or sell before they report earnings with our Earnings ESP Filter.

You can also consider the ones specially picked for you-

Applied Materials (AMAT - Free Report)

Applied Materials is one of the largest semiconductor equipment providers with customers ranging from semiconductor wafer manufacturers and semiconductor integrated circuit manufacturers that either consume the chips they manufacture or sell them to other companies.

This is a particularly exciting time for semi equipment makers because of innovative new semiconductor devices coming to market that is adding to the number of new fabs and retooling at some existing ones. Gartner estimates that while semiconductor capital equipment sales will decline by a sliver in 2016, it will rebound strongly in 2017 to grow 7.4%. 2018 spending is expected to increase another 2.8%. Packaging and assembly equipment will grow the strongest (up 9.9% and 11.4%, in 2017 and 2018), wafer level manufacturing equipment will be up a respective 6.6% and 2.6% in the two years with wafer fab equipment up 6.4% and 2.1%.

We also like AMAT because of some solid numbers-

Zacks Rank #1 (See the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here

Zacks Earnings ESP: 6.06%
Value Score B, Growth Score A, Momentum Score B, VGM Score A (suitable for all investor styles)
January quarter EPS estimate up 6 cents, April 2017 estimate up 5 cents, fiscal year 2017 ended October up 16 cents (7.0%), 2018 up 20 cents (8.7%) in last 90 days
Earnings release date: 02.16.17


Facebook is better known for its social networking platform of the same name but it also offers a number of other products like Messenger, WhatsApp and Instagram that are also extremely popular. Facebook monetizes most of these platforms by serving ads on them while offering them to users free of cost whether accessing through the web or through iOS or Android apps. The company has also been building and open sourcing software blocks with the ultimate goal of reducing the cost of computing in the cloud. It’s also dabbling in VR devices.

Facebook’s average monthly users and advertising revenues have been swelling and the popularity and reach of the platform have stepped up competition between advertisers and pushed up pricing. This is the single largest factor driving the company’s results. But unlike many other technology companies, Facebook has very high penetration amongst netizens in developing economies, which along with ad loading constraints can have an impact on advertising revenue growth.

The following numbers make the stock compelling at this time-

Zacks Rank #1
Zacks Earnings ESP: 5.36%
Growth Score A
December quarter EPS estimate up 9 cents, March 2017 estimate up 3 cents, fiscal year 2016 ended December up 25 cents (8.0%), 2017 up 4 cents (5.0%) in last 90 days
Earnings release date: 02.01.17

Corning (GLW - Free Report)

Corning is a provider of various glass displays and related components for smartphones, TVs and other consumer devices but it also manufactures optical fiber, cable and photonic products for the telecommunications industry.

The company is trying to diversify away from LCD glass, a business characterized by constantly weakening prices. But it isn’t moving away from glass altogether as its Gorilla Glass (hard and thin protective covering glass for smartphones and other devices) is doing very well. Corning continues to launch glass products, such as the AR enabled hybrid windshield in cars, fitness devices, and products facilitating office and home collaboration experiences.

Other areas where the company shows promise is in fiber-optics, where it has a solid product line that it continues to augment with suitable acquisitions and pollution control items for environmental compliance.

A discussion of Corning also isn’t complete without mentioning management’s capital reallocation plan. Accordingly, the company has been returning significant amounts of cash to shareholders. In December, the share buyback authorization was increased by $4 billion.

Here are some exciting numbers as well-

Zacks Rank #1
Zacks Earnings ESP: 6.98%
Value Score B
December quarter EPS estimate up 4 cents, fiscal year 2016 ended December up 9 cents (6.4%), 2017 up 4 cents (2.5%) in last 90 days
Earnings release date: 01.24.17

Microsoft (MSFT - Free Report)

Microsoft is an old company that can pass off as a young one. Being the leader in the PC market with its dominant Windows and Office suites, it spent some time in complacence as the market moved on the cloud and mobile. But with the change in the CEO role, Microsoft has totally adapted its products for the new paradigm and remains a force to reckon with.

True, this market won’t be as easy as the earlier one with Amazon ahead in the cloud, Apple ahead in mobile and Alphabet’s Google just about everywhere it can manage to be. Still Microsoft is unique in that most legacy workloads are on Windows, the company has solid, trusted relationships with enterprise players, a continuously improving hardware line and a cloud business that it has successfully built leveraging Office and Azure. After swallowing LinkedIn, the company is truly in the best position to cater to every corporate need.   

Other reasons to invest in Microsoft today-

Zacks Rank #2
Zacks Earnings ESP: 1.28%
Growth Score A Momentum Score A VGM Score A
Estimates for 2017 ended June up 5 cents (1.7%) and for 2018 up 3 cents (0.9%)
Earnings release date: 01.26.17

Texas Instruments (TXN - Free Report)

Texas Instruments is one of the largest analog companies, one that still makes its own stuff and enjoys the manufacturing scale benefits. Management has steered the business away from consumer driven markets that are given to huge fluctuation in demand. As a result, it generates steady revenue and earnings growth.

This is a particularly exciting time for analog companies because of the technological progress in mobile devices of various kinds and IoT, all of which are big consumers.

Other things to get excited about-

Zacks Rank #2
Zacks Earnings ESP: 1.24%
Growth Score A VGM Score B
Dec quarter EPS estimate up 2 cents, March quarter up 2 cents, fiscal year 2016 ended December up 11 cents (3.6%), 2017 up 10 cents (3.0%) in last 90 days
Earnings release date: 01.24.17

Seagate (STX - Free Report)

Seagate Technology PLC offers a portfolio of hard disc drives (HDDs), solid state drives (SSDs) and solid state hybrid drives. It offers a range of disk drive products for the enterprise, client compute and client non-compute market applications. It also provides data storage services for businesses, including online backup, data protection and recovery solutions.

Seagate remains a good pick going into the earnings announcement based on the following-

Zacks Rank #1
Zacks Earnings ESP: 0.94%
All scores A
December quarter EPS estimate up 14 cents, March quarter up 9 cents, fiscal year 2017 ended June up 49 cents (14.8%), 2018 up 43 cents (12.8%) in last 90 days
Earnings release date: 01.24.17

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