KLA-Tencor Corporation (KLAC) is set to report fourth-quarter fiscal 2014 results on Jul 24. Last quarter, the company posted an 11.8% positive surprise. Let’s see how things are shaping up for this announcement.
Growth Factors this Past Quarter
KLA’s third-quarter earnings of $1.23 per share beat the Zacks Consensus Estimate by 13 cents on higher revenues and impressive expense management. Revenues were up sequentially due to strong demand environment.
However, gross margins were down sequentially but up year over year. KLA witnessed lower-than-expected installation, warranty and retrofit costs in the last quarter.
For the fourth quarter of fiscal 2014, KLA expects revenues in the range of $700–$760 million, orders within $625–$825 million and shipments in the $700–$760 million range. Non-GAAP EPS is expected in the range of 75–95 cents. The Zacks Consensus Estimate for the upcoming quarter is pegged at 90 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: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at 90 cents. Hence, the difference is 0.00%.
Zacks Rank: KLA’s Zacks Rank #2 (Buy) when combined with a 0.00% ESP makes surprise prediction difficult.
We caution against stocks with Zacks Rank #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
You could consider other stocks with a positive Earnings ESP and a favorable Zacks Rank such as:
Charter Communications, Inc. (CHTR), with Earnings ESP of +387.50% and a Zacks Rank #1 (Strong Buy)
First Solar, Inc. (FSLR) has an Earnings ESP of +6.06% 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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