Advanced Micro Devices, Inc. (AMD) is set to report second-quarter 2014 results on Jul 17. In the trailing four quarters, it posted a positive average surprise of 62.5%. Let’s see how things are shaping up for this announcement.
Growth Factors this Past Quarter
Advanced Micro’s first quarter earnings of 2 cents exceeded the Zacks Consensus Estimate due to better-than-expected revenue growth. Revenues were up 28.4% year over year and surpassed its guidance, supported by new products and increased demand for new semi-custom SoCs.
Moreover, the chipmaker’s expanded lineup in the desktop channel, through a shift in focus toward commercial PC business and increasing semi-custom revenue, is expected to drive growth. In addition, Advanced Micro’s new APU lineup, which powers a number of thin and light-touch notebooks are expected to drive strong double-digit sequential increase in mobile processor unit shipments.
Therefore, Advanced Micro’s shift towards more conducive markets, its game console wins, adoption of its new products, position in graphics and good execution are expected to pull the company out of the PC market doldrums.
For the second quarter, Advanced Micro expects revenues to increase 3.0% (+/- 3.0%) sequentially. Non-GAAP gross margin is expected to be 35.0%. Operating expenses are expected to be approximately $435.0 million.
Earnings Whispers?
Our proven model does not conclusively show that AMD 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: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at 2 cents. Therefore, the ESP for the stock is 0.00%.
Zacks Rank: AMD carries a Zacks Rank #3 (Hold) which when combined with a 0.00% 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
Here are some other companies, which you may want to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:
Silicon Motion Technology Corp. (SIMO), with Earnings ESP of +33.33% and a Zacks Rank #1 (Strong Buy)
NVIDIA Corporation (NVDA), with Earnings ESP of +31.58% and a Zacks Rank #1
PetMed Express, Inc. (PETS), with Earnings ESP of +4.00% and a Zacks Rank #2 (Buy)
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