KLA-Tencor Corporation (KLAC) is set to report first-quarter fiscal 2014 results on Oct 24. Last quarter, it posted a 3.8% positive surprise. Let’s see how things are shaping up for this announcement.
Growth Factors this Past Quarter
KLA’s fourth-quarter earnings of 82 cents exceeded the Zacks Consensus Estimate by 3 cents on impressive expense management. However, revenues were down sequentially due to a weak demand environment. Also, gross margins were limited in the last quarter on account of lower revenues.
For the first quarter of fiscal 2014, KLA provided a weak outlook, with revenues anticipated to be in the range of $620-$680 million, down 9.7% sequentially at the midpoint. Non-GAAP EPS is expected in the range of 53-73 cents.
Earnings Whispers?
Our proven model does not conclusively show that KLA will beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.
Zacks ESP: The Most Accurate estimate stands at 63 cents while the Zacks Consensus Estimate is higher at 65 cents. That is a difference of -3.08%.
Zacks Rank: KLA’s Zacks Rank #3 (Hold) when combined with a -3.08% ESP makes surprise prediction difficult.
We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Other Stocks to Consider
Other companies you may want to consider on the basis of our model which shows that these have the right combination of elements to post an earnings beat this quarter include:
Melco Crown Entertainment Limited (MPEL) with Earnings ESP of +6.45% and a Zacks Rank #1 (Strong Buy).
Kemper Corporation (KMPR) with Earnings ESP of +39.53% and a Zacks Rank #1 (Strong Buy).
SY Bancorp Inc. (SYBT) with Earnings ESP of +4.08% and a Zacks Rank #1 (Strong Buy).
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