TriQuint Semiconductor, Inc. (TQNT) is scheduled to report third-quarter 2014 results on Oct 28. In the last reported quarter, earnings beat the Zacks Consensus Estimate by 3 cents. Let’s see how things are shaping up for this announcement.
Factors to Consider
TriQuint is merging with RF Micro Devices, Inc. (RFMD) in a merger of equals to form a new entity named Qorvo, Inc. The transaction is expected to close in the second half of 2014.
By combining TriQuint’s and RFMD’s engineering creativity, product development expertise, complete product portfolios, and high-volume manufacturing, Qorvo will rapidly translate R&D advances into large scale production. The merger strengthens the combined company's ability to better serve the infrastructure and defense/aerospace industries with advanced gallium nitride (GaN) solutions for additional markets and applications, and foundry services to support radar, next generation base stations, optical communications, and the Internet of Things. The newly formed entity is also expected to be a leading player in this sphere.
However, competition is intensifying in the handset market. The increased competition is exerting pricing pressure on margins, which remain a matter of concern as the company plans to expand the existing manufacturing capacity to support higher revenue levels. This is likely to affect its growth.
Earnings Whispers
Our proven model does not conclusively show that TriQuint will beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen. This is not the case here as you will see below.
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is pegged at 0.00%. This is because both the Most Accurate estimate and Zacks Consensus Estimate currently stand at 51 cents.
Zacks Rank #2 (Buy): Though Zacks Rank #1, 2 or 3 increases the predictive power of ESP, the company’s ESP of 0.00% 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 companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat in the imminent future.
Arch Capital Group Ltd. (ACGL) earnings ESP of +2.08% and Zacks Rank #2.
Nordson Corporation. (NDSN) earnings ESP of +0.88% and Zacks Rank #2.
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