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4 S&P 500 Tech Stocks to Buy This Earnings Season

Aniruddha Ganguly

The S&P 500 hit an all-time high of 3,329.88 on Jan 17, continuing its longest bull run in history. Notably, the index rallied 28.9% in 2019 against a 6.2% decline in 2018.

The S&P 500’s momentum is expected to continue this year, courtesy of continuing expansion of the U.S. economy, the dovish stance of the U.S. Federal Reserve, de-escalating trade-war tension between the United States and China post the Phase One agreement and approval of the USMCA act that replaces NAFTA.

The Technology sector is expected to benefit significantly from the ongoing S&P 500 momentum. The Technology Select Sector SPDR’s (XLK) 5.9% year-to-date return is a testimony to the fact.

Rapid adoption of AI, cloud, IoT, autonomous cars and wearables has been fueling growth for the sector. Moreover, increasing video streaming, and growing demand for smart speakers and connected devices, powered by AI, machine learning and deep learning, are key catalysts.

Additionally, the accelerated deployment of 5G technology and faster-than-expected growth in robotics set the stage for more development.

Our Picks

Here, we pick four S&P 500 tech stocks that have solid fundamentals and benefit from the aforementioned growth factors.

Chandler, AZ-based Microchip Technology MCHP is benefiting from strength in the microcontroller business. Strength across end markets, including 5G, data centers, IoT, autonomous vehicles, electric vehicles and AI, is a major growth driver.

The company is scheduled to report third-quarter fiscal 2020 results on Feb 4. Microchip recently updated its third-quarter fiscal 2020 outlook, owing to strong bookings since October 2019.  

Microchip beat earnings estimates in three of the trailing four quarters, the average positive surprise being 3.6%. Moreover, the Zacks Consensus Estimate for third-quarter earnings is pegged at $1.26 per share, up 2.4% over the past 30 days.
 

Microchip Technology Incorporated Price and EPS Surprise

Microchip Technology Incorporated Price and EPS Surprise

Microchip Technology Incorporated price-eps-surprise | Microchip Technology Incorporated Quote

 

Further, the company has an Earnings ESP of +1.91% and a Zacks Rank #1 (Strong Buy), which makes us confident about an earnings beat. You can see the complete list of today’s Zacks #1 Rank stocks here.

Notably, per the Zacks model, a company with a positive Earnings ESP along with a Zacks Rank #1, 2 (Buy) or 3 (Hold) has a good chance of beating estimates. Our research shows that for stocks with this combination, the chance of a positive earnings surprise is as high as 70%.

Cupertino, CA-based Apple AAPL is benefiting from continued momentum in the Services segment, driven by strong App Store sales. On Jan 8, the company announced that its App Store customer spending totaled $1.4 billion between Christmas Eve and New Year’s Eve, up 16% from the same period in 2018.

Non-iPhone devices are also expected to perform well, driven by strong demand for iPad, Apple Watch and AirPod. Additionally, the solid adoption of Apple Watch Series 5 is now helping the iPhone maker strengthen presence in the personal health monitor space.

Apple is scheduled to report first-quarter fiscal 2020 results on Jan 28. The company beat earnings estimates in the trailing four quarters, the average positive surprise being 3.6%.
 

Apple Inc. Price and EPS Surprise

Apple Inc. Price and EPS Surprise

Apple Inc. price-eps-surprise | Apple Inc. Quote

 

Moreover, the Zacks Consensus Estimate for first-quarter earnings is pegged at $4.53 per share, up 0.4% over the past 30 days.

Furthermore, Apple has a Zacks Rank #2 and an Earnings ESP of +4.08%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

MSCI MSCI is benefiting from a strong demand for custom and factor index modules and the increasing adoption of the ESG solution in the investment process.

Additionally, the acquisition of Carbon Delta enhances MSCI’s ability to provide climate risk assessment and assist investors with climate risk disclosure requirements. Further, strong traction in client segments like wealth management, banks and broker dealers, is a positive for the company.

This New York-based company is scheduled to report fourth-quarter 2019 results on Jan 30. Notably, the company beat earnings estimates in the trailing four quarters, the average positive surprise being 3.6%.
 

MSCI Inc Price and EPS Surprise

MSCI Inc Price and EPS Surprise

MSCI Inc price-eps-surprise | MSCI Inc Quote

The Zacks Consensus Estimate for fourth-quarter earnings stayed at $1.62 per share over the past 30 days.

MSCI has an Earnings ESP of +0.51% and a Zacks Rank #2.

Milford, MA-based Waters Corporation WAT is benefiting from growing momentum in the pharmaceutical business, which contributes almost 56% of revenues. Additionally, the company’s growing investments in Liquid Chromatography, Liquid Chromatography-Mass Spectrometry and Precision Chemistry categories are helping it gain traction in the large molecule market.

Waters is scheduled to report fourth-quarter 2019 results on Feb 4. The company beat earnings estimates in two of the trailing four quarters, the average positive surprise being 0.6%.
 

Waters Corporation Price and EPS Surprise

Waters Corporation Price and EPS Surprise

Waters Corporation price-eps-surprise | Waters Corporation Quote

Moreover, the Zacks Consensus Estimate for fourth-quarter earnings increased a penny to $3.02 per share over the past 30 days.

Waters has an Earnings ESP of +0.50% and a Zacks Rank #2.

More Stock News: This Is Bigger than the iPhone!

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MSCI Inc (MSCI) : Free Stock Analysis Report
 
Apple Inc. (AAPL) : Free Stock Analysis Report
 
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Microchip Technology Incorporated (MCHP) : Free Stock Analysis Report
 
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