Alcoa Inc’s (AA) quarterly release marked the official commencement of the Q3 earnings season. However, the aluminium giant’s disappointing results have dimmed hopes of a rebound in earnings.
As per the Zacks Trend report, overall third-quarter earnings for S&P 500 companies are expected to be down 2.9% while revenues are likely to increase a modest 1.2%. Notably, earnings growth is expected to be negative for half of the 16 Zacks sectors, including Technology and Finance, the largest in the index.
Apple to Hit Technology Earnings
Earnings for the Technology sector are expected to be down 1.8% based on 1.1% lower revenues. Apple Inc.’s (AAPL) guidance, which projects earnings decline of 20.7% on 9.6% lower revenues, will deal a major blow to earnings. Excluding the sector, earnings are anticipated to grow 3% on 0.5% higher revenues.
Although Apple’s guidance is a dampener for the sector, we believe growing adoption of cloud computing and artificial intelligence (AI) technology, self-driving cars, personal assistants and Internet of Things (IoT) present significant opportunity for investors.
Per IDC, IT spending on cloud infrastructure — servers, enterprise storage, and Ethernet switches for the enterprise private cloud and co-location services — will increase 15.5% in 2016 to $37.1 billion. The growth rate is particularly noticeable when compared to spending on traditional IT, which is expected to decline 4.4% in 2016.
How to Make the Right Pick?
With the existence of a number of industry players, finding the right stocks that have the potential to beat earnings could pose to 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.
Earnings ESP is our proprietary methodology for determining stocks that have the best chance to surprise with their next earnings announcement. It provides the percentage difference between the Most Accurate estimate and the Zacks Consensus Estimate.
Our research shows that for stocks with this combination, the chance of a positive earnings surprise is as high as 70%.
Given below are six technology providers that have the right combination of elements to post an earnings beat this quarter…
Asure Software Inc (ASUR) – Austin, TX-based Asure Software is a provider of cloud-based software-as-a-service (SaaS) solutions that help manage mobile workforces and global workspaces. The company’s clientele includes the likes of Aetna, Apple, Pfizer Inc. (PFE), salesforce.com, Inc. (CRM) among others.
Currently, Asure flaunts a Zacks Rank #1 and has an earnings ESP of +14.29%. The company is expected to report third-quarter 2016 results on Nov 21. You can see the complete list of today’s Zacks #1 Rank stocks here.
NetApp Inc. (NTAP) – Sunnyvale, CA-based NetApp provides enterprise storage and data management software and hardware products and services. The company’s product line comprises two storage platforms – FAS storage platform and E-Series platform. Leveraging on these solutions, the company addresses both the Storage Area Network (SAN) and Networked Attached Storage (NAS) markets.
NetApp posted an average positive earnings surprise of 14.52% over the last four quarters. This Zacks Rank #1 stock has an earnings ESP of +2.63%. The company is expected to report second-quarter 2017 results on Nov 16.
SITO Mobile Ltd (SITO) – NJ-based SITO Mobile provides wireless application development, publishing and distribution. It offers mobile location-based advertising and mobile messaging platforms that enable brands, agencies, and retailers to transform digital marketing by delivering targeted mobile advertising campaigns based on geo-location, in-store traffic, and customer response.
SITO Mobile posted an average earnings surprise of 5.36% over the last four quarters. The stock holds a Zacks Rank #1 with an earnings ESP of +100%. The company is expected to announce its third-quarter 2016 financial numbers on Nov 22.
Vocera Communications Inc (VCRA) – Headquartered in San Jose, CA, Vocera provides mobile communication solutions focused on addressing critical communication challenges facing hospitals. The company posted an average positive earnings surprise of 28.14% over the last four quarters.
Vocera currently sports a Zacks Rank #1 and has an earnings ESP of +10%. The company is scheduled to report third-quarter 2016 results on Oct 27.
Veeco Instruments Inc. (VECO) – Headquartered in Plainview, NY, Veeco designs, manufactures, markets and services a broad line of precision beam etching and surface measurement systems used in microelectronic products. The stock recorded an average positive earnings surprise of 22.08% over the last four quarters.
Veeco currently sports a Zacks Rank #1 and has an earnings ESP of +17.86%. The company is set to report third-quarter 2016 results on Nov 1.
Windstream Holdings, Inc. (WIN) – Headquartered in Little Rock, AR, Windstream, together with its subsidiaries, provides local and long distance phone service and high-speed Internet to residential and business customers across 48 states. The stock recorded an average positive earnings surprise of 138% over the trailing four quarters.
Windstream currently sports a Zacks Rank #1 and has an earnings ESP of +2.56%. The company is expected to report third-quarter 2016 results on Nov 3.
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