Maxim Integrated Products, Inc. (MXIM) is set to report second-quarter fiscal 2015 results on Jan 22. Last quarter, it posted a 2.70% positive surprise. Let’s see how things are shaping up for this announcement.
Factors to Consider
Maxim posted mixed first quarter results with the bottom line beating the Zacks Consensus Estimate and the top line missing the same. The sequential revenue decrease of 9.7% was primarily due to lower smartphone volumes at the company’s largest mobility customer.
However, earnings were within management’s guided range, primarily attributable to a higher gross margin, reduced operating expenses and a lower tax rate, offset by lower revenues.
Of late, Maxim has been making a strategic shift to advanced node process technology development through a new collaboration with its foundry partners. Also, the company remains committed to growing its Mobility business by increasing content opportunities, broadening the customer base and targeting new opportunities like wearable devices.
Maxim’s overall strategy of mixed signal and analog integration is bearing fruit and has long-term growth prospects. All these efforts taken together are expected to help the company deliver good results in the soon-to-be-reported quarter.
For the second quarter, Maxim expects revenues in the range of $540 million–$580 million based on a quarter-end backlog of $379.0 million. Gross margin is expected to be in the 55%–59% range on a GAAP basis and 58%–62% on an adjusted basis (excluding special items). Operating expenditure is expected to be flat sequentially. Earnings per share are expected to be 19 cents to 25 cents on a GAAP basis and 26 cents to 32 cents on an adjusted basis (excluding special items).
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 29 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 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
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:
Ellie Mae, Inc. (ELLI) with Earnings ESP of +40.00% and a Zacks Rank #1 (Strong Buy)
Apple Inc. (AAPL) with Earnings ESP of +0.78% and a Zacks Rank #2 (Buy)
Hutchinson Technology Inc. (HTCH) with Earnings ESP of +7.69% and a Zacks Rank #2
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