Maxim Integrated Products, Inc. (MXIM) is set to report fourth-quarter fiscal 2014 results on Jul 24. Last quarter, it posted a 10.26% positive surprise. Let’s see how things are shaping up for this announcement.
Growth Factors This Past Quarter
Maxim posted decent third quarter results with the bottom line beating the Zacks Consensus Estimate and the top line matching the same. The sequential revenue decrease of 2.4% was primarily due to a decline in consumer and computing revenues.
The decline in the consumer market was attributable to normal seasonality, which was partly offset by the ramp of a new smartphone at the company’s main consumer. Computing revenues declined primarily due to a decline in both notebook and server businesses.
Of late, Maxim has increased its focus on the faster-growing consumer and computing end markets. It has been diversifying its position within the mobility market in several ways, such as expanding its tech offerings for mobile devices, growing revenue and content in the mid-range smartphone market with significant growth in China and so on.
The company aims to integrate simpler device design, higher performance, power and space efficiency in its different businesses. The increased integration in its devices should help it drive secular growth in the automotive, industrial communications and data center markets.
For the fourth quarter, Maxim expects revenues in a range of $635–$665 million. Backlog is expected to be $413.0 million.While GAAP gross margin is expected be in the 58%–60% range, GAAP earnings are expected to be in the range of 38 cents – 42 cents. Capex is expected to be maintained at 5-7% of revenue.
Earnings Whispers?
Our proven model does not conclusively show that Maxim will beat estimates 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 48 cents. Hence, the difference is 0.00%.
Zacks Rank: Maxim’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 want to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:
- Charter Communications, Inc. (CHTR), with Earnings ESP of +387.50% and a Zacks Rank #1 (Strong Buy)
- NVIDIA Corp. (NVDA), with Earnings ESP of +31.58% and a Zacks Rank #1
- Silicon Motion Technology Corp. (SIMO), with Earnings ESP of +33.33% and a Zacks Rank #1
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