Xilinx Inc. (XLNX) is set to report first-quarter fiscal 2015 results on Jul 22. Last quarter, the company posted a negative earnings surprise of 3.6%. Let us see how things are shaping up for this announcement.
Growth Factors This Past Quarter
Xilinx reported mixed fourth-quarter results wherein the top line exceeded the Zack Consensus Estimate but the bottom line lagged the same. However, both revenues and earnings increased on a year-over-year basis. Improvement in revenues from Communications & Data Center segment primarily due to China LTE deployments contributed to the year-over-year increase in the top line.
Moreover, the growing demand for 28-nm nodes driven by higher wireless deployments and strength in the wired communication segment are expected to remain the growth drivers. We believe that the company’s continued focus on margin expansion, cost reduction across its product portfolio and higher yield are positives. The company's product launches are also expected to boost revenues.
However, stiff competition from Altera Corp. and dwindling PC (significant consumer for semiconductor chips) market sales keep us concerned for the near term.
Earnings Whispers?
Our proven model does not conclusively show that Xilinx 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 61 cents. Hence, the difference is 0.00%.
Zacks Rank: Xilinx’s Zacks Rank #3 (Hold), 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 consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:
NVIDIA Corporation (NVDA) has an Earnings ESP of +31.58% and holds a Zacks Rank #1 (Strong Buy).
F5 Networks, Inc. (FFIV) has an Earnings ESP of +3.81% and a Zacks Rank #2 (Buy).
Garmin Ltd. (GRMN) has an Earnings ESP of +1.33% and a Zacks Rank #3.
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