Popular multinational technology provider MKS Instruments (MKSI) will release its third-quarter 2014 results before the market opens on Oct 22. MKS Instruments had generated positive earnings surprise of 50.00% in the preceding quarter. Let’s figure out how things are shaping up before the imminent earnings publication.
Factors to Influence Q3 Results
MKS Instruments enjoys high brand value in the market and is well known for offering non-imitable technological products and services worldwide. Increasing demand in the semiconductor industry is augmenting the company’s organic revenue growth. Also, growing demand for the company’s products in the Asian market signify an improvement in its global footprint.
MKS Instruments’ improving financial strength bodes well for its business development programs in the long run. The company, by introducing greater product diversification within its manufacturing facilities, has successfully increased its aggregate sales. Moreover, accretive acquisitions have facilitated its product diversification process. The acquisition of Granville-Phillips is expected to generate annual revenue of $30 million and adjusted earnings per share in the range of $0.10 to $0.12 for full year 2014.
However, the international business affairs of MKS Instruments are prone to severe currency and exchange rate risks. Furthermore, economic, political and social turmoils in international marketplaces are likely to partially influence its revenue and profitability in the long run. Some products manufacturing processes of MKS Instruments involve long production tenures and hence experience mounting costs. In the face of severe market rivalry threats, the company makes large investments regarding technological innovations in order to differentiate its services within the semiconductor industry. However, these products often become technologically obsolete within a small span of time, thus causing substantial loss.
Earnings Whispers
Our proven model does not conclusively show that MKS Instruments is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as we will see below.
Zacks ESP: Earnings ESP for MKS Instruments, is currently pegged at 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate for the stock stand at 37 cents per share, indicating in-line earnings.
Zacks Rank
MKS Instruments' Zacks Rank #3 (Hold), when combined with a 0.00% ESP, makes surprise predictions 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 a negative estimate revision momentum.
Other Stocks to Consider
Here are some companies in the industry that shareholders may want to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:
Xcerra Corporation (XCRA) with Earnings ESP of +4.17% and a Zacks Rank # 2 (Buy).
Thomson Reuters Corporation (TRI) with Earnings ESP of +2.22% and a Zacks Rank # 3.
Analog Devices, Inc. (ADI) with Earnings ESP of +4.41% and a Zacks Rank # 3.
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