SanDisk Corp. (SNDK) is set to report third-quarter fiscal 2014 results on Oct 16. Last quarter, the company posted a positive earnings surprise of 0.19%. It is worth noting that SanDisk has outperformed the Zacks Consensus Estimate in all the four preceding quarters with a positive earnings surprise average of 2.9%.
Let us see how things are shaping up for this announcement.
Growth Factors this Past Quarter
SanDisk posted better-than-expected second-quarter results with both its top and bottom lines surpassing the Zacks Consensus Estimate. Revenues from the commercial and retail channels were strong, aided by client and enterprise class SSD sales.
The strategic acquisition of Fusion-ioInc and SMART Storage Systems is expected to expand SanDisk’s offerings in the Enterprise SSD segment. However, the company provided a tepid third-quarter revenue guidance. Also, declining price per gigabyte, primarily due to an unfavorable product mix, could impact the company’s results.
Going forward, lackluster PC sales, competition from Micron Technology Inc. and currency fluctuations remain headwinds. However, we remain positive on management’s expectations of a turnaround in the coming quarters and strong secular demand for its storage products.
Recently, SanDisk unveiled its new 64GB Extreme PRO microSDX and 512GB Extreme PRO SDXC UHS-I cards. The new offering will help the company expand its SSD product profile.
It is also worth mentioning that Apple Inc. is currently a major customer for SanDisk. Hence we believe that with price and cost benefits as well as a long-term NAND supply agreement with a company like Apple will help SanDisk to outperform in the NAND market.
Earnings Whispers?
Our proven model does not conclusively show that SanDisk will beat earnings this quarter. This 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.
Negative Zacks ESP: This is because the Most Accurate estimate stands at $1.21 while the Zacks Consensus Estimate is $1.25. That is a difference of -3.2%.
Zacks Rank #3 (Hold): SanDisk’s Zacks Rank #3 when combined with a negative 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.
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:
Apple Inc. (AAPL) Earnings ESP of +3.85% and a Zacks Rank #1 (Strong Buy)
Seagate Technology Public Limited Company (STX) has an Earnings ESP of +1.60% and a Zacks Rank #3
Allegheny Technologies Inc. (ATI) Earnings ESP of +40.0% and a Zacks Rank #3
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