We expect Apple Inc. (AAPL) to beat expectations when it reports third quarter 2013 results on Jul 23.
Why a Likely Positive Surprise?
Our proven model shows that Apple is likely to beat earnings because it has the right combination of two key ingredients.
Positive Zacks ESP: Expected Surprise Prediction or ESP (Read: Zacks Earnings ESP: A Better Method), which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is at +2.19%. This is very meaningful and a leading indicator of a likely positive earnings surprise for shares.
Zacks Rank #3 (Hold): Note that stocks with Zacks Ranks of #1, #2 and #3 have a significantly higher chance of beating earnings. The sell rated stocks (#4 and #5) should never be considered going into an earnings announcement.
The combination of Apple’ Zacks Rank #3 (Hold) and +2.19% ESP makes us very confident in looking for a positive earnings beat on Jul 23.
What is Driving the Better-Than-Expected Earnings?
We believe that Apple’s third quarter results will benefit from strong iPhone activation at Verizon’s. In its recently concluded second quarter, Verizon activated 3.9 million iPhones, significantly up from 2.7 million in the year-ago quarter. Moreover, higher App store sales are expected to boost Apple’s top-line growth in the quarter.
Other Stocks to Consider
Apart from Apple, we also expect earnings beat from the following stocks.
Invensense Inc (INVN), Earnings ESP of +8.33% and Zacks Rank #2 (Buy).
Huron Consulting Group Inc. (HURN), Earnings ESP of +1.64% and Zacks Rank #2 (Buy).
Gartner Inc. (IT), Earnings ESP of +1.96% and Zacks Rank #2 (Buy).
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