Tessera Technologies Inc. TSRA is slated to report first-quarter 2015 results on May 5. In the last reported quarter, Tessera recorded a positive earnings surprise of 51.35%. Let’s see how things are shaping up for this announcement.
Factors to Consider
In the previous quarter, Tessera posted encouraging results with both the top and bottom lines exceeding the Zacks Consensus Estimate. Tessera had reported revenues of $59.9 million, down 35.8% sequentially and 123.7% year over year.
However, revenues were above the Zacks Consensus Estimate of $58.0 million and at the high end of the company's guidance range. The decrease was basically due to a fall in episodic revenues, which was partially offset by growth in recurring 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. Cost savings from these restructuring efforts will act as a positive for the company. A number of patent litigations have also been settled in its favor.
For the first quarter of 2015, Tessera expects revenues in the range of $78 million–$80 million. The Zacks Consensus Estimate is pegged at $77.0 million for revenues. GAAP earnings per share are expected to be between 58 cents and 62 cents, while non-GAAP earnings per share are expected to be in the range of 68 cents – 72 cents.
Also, the company continues to see growth in the FotoNation imaging group due to recent product additions. These positive developments and its premium imaging technology reflect that the business will grow significantly going forward in the mobile and adjacent markets.
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 and the Zacks Consensus Estimate stands at 64 cents. Hence, the difference is 0.00%.
Zacks Rank: Tessera currently has a Zacks Rank #3 (Hold). 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:
Calumet Specialty Products Partners LP CLMT has an Earnings ESP of +12.50% and a Zacks Rank 2 ( Buy).
Skullcandy, Inc. SKUL has an Earnings ESP of +7.69% and a Zacks Rank #2.
The Walt Disney Co. DIS has an Earnings ESP of +0.90% and a Zacks Rank #2.
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