The second-quarter earnings season has been impressive thus far. The last quarter was a strong one both in terms of economic data and stock market performance.

As of Jul 16, 41 companies of the S&P 500 Index reported results. Total earnings of these companies were up 132.7% year over year on 13.8% higher revenues. Moreover, 90.2% of these companies beat their earnings per share (EPS) estimates and 87.8% surpassed revenue estimates.

For the second quarter as a whole, total earnings of the S&P 500 Index are expected to be up 69% year over year on 19.2% higher revenues. This indicates an improvement over the initial projection of EPS increasing 62.2% from the same period last year on 18.2% higher revenues.

Meanwhile, five technology bigwigs (market capital > $40 billion) are set to beat on earnings results this month. Investment in these may be fruitful in the near term.

Technology Sector in Q2 At a Glance

The technology sector had soared 43.6% in pandemic-ridden 2020. However, in first-quarter 2021, it gained a mere 2.4%. This sector regained its glory in second-quarter 2021 rallying 11.4%.

Aside from cyclical stocks that gained from the great reopening of the U.S. economy, technology stocks also regained momentum owing to an extremely low market interest rate and growing global demand for innovative hi-tech products.

In the last quarter, the major concern of investors was mounting inflationary pressure. During mid-May to mid-June, Wall Street was rife with speculation that the Fed may give the timeline as to when it will start tapering bond buying in its June FOMC meeting.

The Fed Chairman Jerome Powell once again reiterated that the central bank is in no hurry to alter its ongoing accommodative monetary policies any time soon. Despite mounting inflationary pressure, Powell still considers it transitory and expects it to moderate by the end of this year.

Consequently, the yield of the benchmark 10-Year U.S. Treasury Note hovered around 1.5%, well below 1.778% recorded on Mar 30. Low market-risk-free return means lower discounting for high-growth technology stocks and higher net present value from investing.

Moreover, the Fed has signaled that a rate hike is not likely to take place before late 2023. Therefore, the current benchmark lending rate of 0-0.25% will be extremely helpful for those technology companies that depend on easy access to cheap credit for future growth.

Our Top Picks

The five technology giants discussed herein are slated to release earnings results this month. Each of these stocks carries a Zacks Rank# 2 (Buy) and has a positive Earnings ESP. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Our research shows that for stocks with the combination of a positive Earnings ESP and a Zacks Rank #3 (Hold) or better, the chance of an earnings beat is as high as 70%. These stocks are anticipated to appreciate after earnings releases. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

The chart below shows the price performance of our five picks in the last quarter.

Image Source: Zacks Investment Research

Texas Instruments Inc. (TXNFree Report) has an Earnings ESP of +1.60% for second-quarter 2021. It has an expected earnings growth rate of 24.3% for the current year. The Zacks Consensus Estimate for the current year has improved 0.4% over the last 30 days.

It recorded earnings surprises in the last four reported quarters, with an average beat of 34.1%. The company is set to release earnings results on Jul 21, after the closing bell.

Apple Inc. (AAPLFree Report) has an Earnings ESP of +3.40% for third-quarter fiscal 2021 (ended June 2021). The company has an expected earnings growth rate of 58.2% for the current year (ending September 2021). The Zacks Consensus Estimate for the current year has improved 0.2% over the last 7 days.

It recorded arnings surprises in the last four reported quarters, with an average beat of 23%. The company is set to release earnings results on Jul 27, after the closing bell.

Alphabet Inc. (GOOGLFree Report) has an Earnings ESP of +4.62% for second-quarter 2021. The company has an expected earnings growth rate of 53.1% for the current year. The Zacks Consensus Estimate for the current year has improved 0.3% over the last 7 days.

It recorded earnings surprises in the last four reported quarters, with an average beat of 43%. The company is set to release earnings results on Jul 27, after the closing bell.

Advanced Micro Devices Inc. (AMDFree Report) has an Earnings ESP of +3.41% for second-quarter 2021. The company has an expected earnings growth rate of 68.2% for the current year. The Zacks Consensus Estimate for the current year has improved 0.5% over the last 30 days.

It recorded earnings surprises in the last four reported quarters, with an average beat of 13.8%. The company is set to release earnings results on Jul 27, after the closing bell.

Amphenol Corp. (APHFree Report) has an Earnings ESP of +1.29% for second-quarter 2021. The company has an expected earnings growth rate of 21.9% for the current year. The Zacks Consensus Estimate for the current year has improved 0.4% over the last 30 days.

It recorded arnings surprises in the last four reported quarters, with an average beat of 18.3%. The company is set to release earnings results on Jul 28, before the opening bell.

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