Tessera Technologies Inc. (TSRA) is slated to report fourth-quarter 2014 results on Feb 10. In the last reported quarter, Tessera recorded a positive earnings surprise of 19.72%. Let’s see how things are shaping up for this announcement.
Factors to Consider
Tessera reported strong third-quarter 2014 earnings from continuing operations that jumped from a significant loss in the year-ago quarter and a small profit in the previous quarter to sail past the Zacks Consensus Estimate. It also reported revenues of $93.3 million, up 150.8% sequentially and 150.5% year over year. Revenues beat the Zacks Consensus Estimate of 92.0 million. The growth was backed by both recurring and episodic revenues.
We believe that the company is on the right track. It has lowered its operating expenses, redirected investment to areas with growth potential and secured several patent licensing agreements. A number of patent litigations have also been settled in its favor. In addition to its xFD partnership with Micron, it is working on other xFD partnerships. On the BVA front, Tessera is engaged with a number of companies.
Earnings Whispers
Our proven model does not conclusively show that Tessera is likely to beat earnings this quarter as it does not have the right combination of two key ingredients. 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: The Most Accurate estimate stands at 36 cents while the Zacks Consensus Estimate stands higher at 37 cents. Hence, the difference is – 2.70%.
Zacks Rank: Tessera currently has a Zacks Rank #1 (Strong 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 a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks That Warrant a Look
Here are some companies you may want to consider as our model shows these have the right combination of elements to post an earnings beat:
Ellie Mae, Inc. (ELLI) has an Earnings ESP of +40.00% and a Zacks Rank #3 (Hold).
GrubHub Inc. (GRUB) has an Earnings ESP of +9.09% and a Zacks Rank #3.
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