Leading semiconductor manufacturer Qorvo, Inc. QRVO is expected to report its fourth-quarter fiscal 2015 results on Apr 22. In the last reported quarter, quarterly earnings comfortably exceeded the Zacks Consensus Estimate by 36 cents. Let’s see how things are shaping up for this announcement.
Key Factors in the Fourth Quarter
Qorvo has brought all the critical radio frequency (RF) components that are essential for fabricating mobile devices under a common platform, thereby creating an undisputed market leader with a diversified product portfolio. These include power amplifiers (PAs), power management integrated circuits (PMICs), antenna control solutions, switch-based products and premium filters. With global smartphone users predicted to triple to 5.6 billion by 2019, the company is expected to generate relatively higher revenues.
The company also serves the infrastructure and defense/aerospace industries with advanced gallium nitride (GaN) solutions for additional applications, and foundry services to support radar, next generation base stations, optical communications and the Internet of Things. With a broad product portfolio and an improved operating model, Qorvo has created new revenue-generating opportunities in three large global markets, namely, mobile devices, network infrastructure and aerospace/defense.
Qorvo is expected to leverage the core strengths of both the merged companies, namely TriQuint Semiconductor, Inc. and RF Micro Devices Inc., to rapidly translate research and development advances into large scale production. In addition, synergistic benefits from the merger is likely to increase profitability through economies of scale and mutual sharing of manufacturing expertise, research and development costs and adjustment of staffing expenses. The transaction is expected to generate $75 million of cost savings in the first year of its operation, followed by another $75 million in the second year. The deal is also expected to be accretive to non-GAAP earnings in the first full fiscal year of its operation.
Earnings Whispers
However, our proven model does not conclusively show that Qorvo is likely to beat earnings this quarter as it lacks the key ingredients for a success recipe.
Zacks ESP: Expected Surprise Prediction or Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is currently pegged at 0.00%. This indicates a likely in-line earnings for the shares.
Zacks Rank: Qorvo’s Zacks Rank #3 (Hold) when combined with 0.00% ESP reduces the predictive power of ESP. Note that stocks with a Zacks Ranks of #1 (Strong Buy), #2 (Buy) and #3 have a significantly higher chance of beating earnings. The Sell-rated stocks (#4 and #5) should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Other Stocks to Consider
Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Waste Management, Inc. WM, earnings ESP of +2.04% and Zacks Rank #2.
Popular, Inc. BPOP, earnings ESP of +9.86% and Zacks Rank #1.
Huntington Ingalls Industries, Inc. HII, earnings ESP of +2.91% and Zacks Rank #2.
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