Atmel Corporation (ATML) is scheduled to report its fourth-quarter 2014 results on Feb 4 after the market closes. In the last reported quarter, quarterly earnings were in line with the Zacks Consensus Estimate. Let’s see how things are shaping up for this announcement.
Factors to Consider
Atmel is in the process of transforming itself into a microcontroller-based company, by continually introducing high-margin products that have solid growth potential. These products are expected to boost the company’s top line and unlock sustainable value. Recently, Atmel commenced the sampling procedure of its next generation maXStylus mXTS220 to various global customers. The increasing demand for Atmel’s latest maXStylus solutions are expected to improve its business in the touch sensing market.
Also, it unveiled the revolutionary maXTouch U series, a solution for designing new leading-edge displays for capacitive touchscreens. With this technology, original equipment manufacturers (OEMs) will not need to compromise on touch and display performance when using thinner stacks with very thin film and glass substrates. The maXTouch U architecture is way ahead of the competing solutions in the market as it enables the fastest touch response on a comparative basis.
However, Atmel operates in an intensely competitive landscape. With the rise in competition within the industry, the company is witnessing a decline in its product prices, which in turn is detrimental to its overall margins. The industry in which Atmel operates is marked by rapid technological changes, evolving standards and short product life cycles. The failure to develop new products that are readily accepted by the market could have an adverse impact on the company’s results in the long term.
Earnings Whispers
Our proven model does not conclusively show that Atmel will beat earnings estimate in 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 8 cents.
Zacks Rank: Atmel’s Zacks Rank #3, when combined with a 0.00% ESP, makes surprise prediction difficult. Note that stocks with Zacks Rank #1, #2 and #3 coupled with a positive ESP have a significantly higher chance of beating earnings.
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 +0.95% and a Zacks Rank #1
Century Aluminum Co. (CENX), earnings ESP of +7.69% and a Zacks Rank #2.
Alnylam Pharmaceuticals, Inc. (ALNY), earnings ESP of +4.55% and a Zacks Rank #2.
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