6 Technology Stocks Set To Beat Estimates In Q2 Earnings

The second-quarter 2017 earnings season is in its initial stage with just 23 S&P 500 members or 4.6% of the index’s total membership reporting their quarterly results as of Jul 7, according to the latest Zacks Earnings Preview report.

Per the Preview article, the trend this earnings season indicates that we may finally see back-to-back four quarters of earnings growth in the Technology sector, after several quarters of decline. The report projects that earnings for the sector will improve 10.1% from the year-ago period on 6% higher revenues.

The strong growth projections may be mainly attributed to the growing adoption of cloud computing, cloud infrastructure build-out, Big Data, flash storage, networking, security, 3D printing, wearable devices and Internet of Things (IoT) at home, office and car. Apart from this, modestly improving PC shipments also raise expectations.

Additionally, anticipation of a recovery in IT spending in 2017, after two consecutive years of decline, according to a research report of Gartner Inc. (IT), bodes well for the technology sector. Gartner projects IT spending to increase 1.4% year over year to $3.41 trillion in 2017. Notably, in 2015 and 2016, worldwide spending declined 5.5% and 0.6%, respectively.

The optimism surrounding the technology sector is well reflected in its year-to-date performance. The sector has outperformed the S&P 500 in the aforesaid period. Notably, the Technology Select Sector SPDR ETF (XLK) returned 14.7% in the year-to-date period compared with the S&P 500’s gain of 8.3%.

The technology space continues to be investors’ favorite due to its dynamic nature. It is predicted to grow faster than ever before as evident from Gartner’s latest forecasts, as well as the improving U.S. economic data.

The sector is poised to witness tremendous growth this earnings season and there is a high probability that various tech stocks will report better-than-expected results. It commonly happens that an earnings beat boosts investors’ confidence in the stock, which is reflected in its rapid price appreciation.

Therefore, now it is wise to invest in such stocks, in order to catch the post-earnings rally. However, this is easier said than done. Striking the right chord needs a fair amount of luck.

Then How to Make the Right Pick?

With the existence of a number of companies in the tech sector, finding the right stocks that have the potential to beat on earnings could be a daunting task. Our proprietary methodology, however, makes it fairly simple for you. You could narrow down the list of choices by looking at stocks that have the combination of a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), and a positive Earnings ESP.  You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

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Disclosure: Zacks.com contains statements and statistics that have been obtained from sources believed to be reliable but are not guaranteed as to accuracy or completeness. References to any ...

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