Tech stocks have seen profits grow double-digits year over year over the last three quarters. A similar winning streak is widely expected this earnings season. And why not? Computer and software makers are having a ball on the back of White House’s initiative to trim tax rates, while high-end gaming, emergence of Internet-of-Things (IoT) and automation are driving demand for chips.

Let us, thus, keep an eye on tech stocks that are likely to come up with stellar second-quarter earnings numbers.

Tech Stocks Back Most Gains in 2018

More than half of the equity market’s gains so far this year have been contributed by tech titans. FAANG stocks, an acronym that refers to Facebook, Apple, Amazon, Netflix and Google-parent Alphabet, have been mostly treading higher of late. Amazon, for example, has climbed more than 50% so far this year, while Netflix has more than doubled.

Ben Carlson, a portfolio manager at Ritholtz Wealth Management, added that Amazon itself accounts for 35% of the S&P 500’s year-to-date return and Netflix contributes 21%.

Another tech bellwether Microsoft has lately scaled a record high, hitting the coveted $800 billion market cap for the first time. In fact, the much-loved tech sector rallied 14% so far this year, while the S&P 500 went up just 4.2%.

Catalysts Behind the Surge

Tech heavyweights continue to influence the U.S. stock market for good reason. The Republican tax overhaul policy is providing the much-needed windfall to tech companies. The headline-grabbing move lowered the corporate tax rate from 35% to 21%, while any income brought back from overseas is taxed 8% to 15.5%, instead of the current 35%. This extra cash is helping the companies pursue a combination of share buybacks, dividend payouts and M&A activities.

The prospect of a cut in personal taxation is also a major driving force for big tech firms. With more cash in hand, investors have more room to invest. At the same time, IoT, which connects various devices to the cloud, is expected to be a huge growth driver for tech majors.

Chip makers, in the meantime, made giant strides as chips are in demand for some of the fastest growing tech industries in the world like e-sports and crypto mining. E-sports, a multiplayer video game for professional gamers, need thousands of semiconductor chips for production. These chips are an essential part of crypto mining as they provide the processing power needed for decoding blockchain algorithms.

Tech’s Earnings Party Still Going Strong

As tech companies continue to dominate the equity market, analysts expect tech earnings to be up 23.8% on 10.7% higher revenues in the second quarter, which would follow 31.1% earnings growth on 13.1% revenue rise in the first quarter.

And if this happens, it would be the fourth successive quarter that the Information Technology sector of the S&P 500 produced earnings growth of 20% or more. Lori Calvasina, head of U.S. equity strategy at RBC Capital Markets, had written to investors that “net buy ratings of major tech players remain extremely high relative to history.”

But, there are concerns for them this earnings season. Tech valuations mostly remain at elevated levels compared to the broader equity market. Needless to say, trade war issues can also affect its global supply chain.

5 Tech Stocks for Q2 Earnings Beat

Most investors are forecasting big gains from chips and big tech companies this earnings season on the back of favorable government policy. This calls for investing in five tech stocks, which are expected to report a significant uptick in second-quarter earnings.

These stocks have a positive Earnings ESP. This 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. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter. These stocks, in the meanwhile, also flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy).

Turtle Beach Corporation HEAR operates as an audio technology company. The company has a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings increased 4.1% over the last 60 days. It is expected to report earnings results for the quarter ending June on Aug 9. Turtle Beach has an Earnings ESP of +228.57%.

Turtle Beach Corporation Price and EPS Surprise

 

Turtle Beach Corporation Price and EPS Surprise

Turtle Beach Corporation price-eps-surprise | Turtle Beach Corporation Quote

Etsy, Inc. ETSY operates Etsy.com, a commerce platform to make, sell, and buy goods online and offline. The company has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings moved up 25.6% over the last 60 days. It is expected to report earnings results for the quarter ending June on Aug 2. Etsy has an Earnings ESP of +33.33%.

Etsy, Inc. Price and EPS Surprise

 

 Price and EPS Surprise

price-eps-surprise | Quote

Twitter, Inc. TWTR operates as a platform for public self-expression and conversation in real time. The company has a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings increased 1.3% over the last 60 days. It is expected to report earnings results for the quarter ending June on Jul 27. Twitter has an Earnings ESP of +7.06%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Twitter, Inc. Price and EPS Surprise

 

Twitter, Inc. Price and EPS Surprise

Twitter, Inc. price-eps-surprise | Twitter, Inc. Quote

Scientific Games Corporation SGMS develops technology-based products and services, and related content for the gaming, lottery, and interactive gaming industries. The company has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings surged more than 100% over the last 60 days. It is expected to report earnings results for the quarter ending June on Jul 23. Scientific Games has an Earnings ESP of +64.71%.

Scientific Games Corp Price and EPS Surprise

 

Scientific Games Corp Price and EPS Surprise

Scientific Games Corp price-eps-surprise | Scientific Games Corp Quote

Vishay Intertechnology, Inc. VSH manufactures and supplies discrete semiconductors and passive components. The company has a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings increased 3.9% over the last 60 days. It is expected to report earnings results for the quarter ending June on Aug 7. Vishay Intertechnology has an Earnings ESP of +2.08%.

Vishay Intertechnology, Inc. Price and EPS Surprise

 

Vishay Intertechnology, Inc. Price and EPS Surprise

Vishay Intertechnology, Inc. price-eps-surprise | Vishay Intertechnology, Inc. Quote

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