Rambus Inc. RMBS is set to report first-quarter fiscal 2015 results on Apr 20. Last quarter, the company posted an extraordinary positive earnings surprise of 100%. Moreover, it is also worth noting that Rambus has outperformed the Zacks Consensus Estimate in all the four preceding quarters with an average positive surprise of 470%.
Let us see how things are shaping up for this announcement.
Growth Factors this Past Quarter
Rambus reported mixed fourth-quarter results as the bottom line surpassed the Zacks Consensus Estimate while the top line missed the same. Also, the year-over-year comparisons were unfavorable primarily due to lower royalty revenues from Samsung and NVIDIA.
Nonetheless, with energy-efficient lighting, LED products finding a place in the latest architectural, retail, commercial and residential lighting fixtures, we believe Rambus is in a favorable position to capitalize on this opportunity.
Rambus is going through a restructuring phase and we expect it to yield favorable results in the coming quarters. The company has resolved several of its legal disputes, which lowered litigation expenses and positively impacted operating results. Additionally, licensing agreements — the results of successful monetization of its patents — remain a recurring revenue source for Rambus.
The company’s investments in the CryptoManager platform and certain memory and interface technologies can impact margins in the near term. Other companies in the same space include Semiconductor Manufacturing International Corp. and Advanced Micro Devices AMD.
Earnings Whispers?
Our proven model does not conclusively show that Rambus will beat earnings 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 7 cents. Hence, the difference is 0.00%.
Zacks Rank: Rambus’ Zacks Rank #2 (Buy) 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.
Stocks to Consider
Here are some other companies, which you may consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:
Broadcom Corp. BRCM with Earnings ESP of +5.00% and a Zacks Rank #1 (Strong Buy)
Apple Inc. AAPL with Earnings ESP of +6.05% and a Zacks Rank #2
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