Global technology distributor, Avnet Inc. AVT is scheduled to report fourth-quarter fiscal 2015 results on Aug 4. Last quarter, the company posted a negative earnings surprise of 4.6%. Let's see how things are shaping up for this announcement.
Factors to Consider
Avnet posted lower-than-expected third-quarter fiscal 2015 results. Year-over-year comparisons were however favorable primarily due to the solid performance of the EM business and higher operating income.
Moreover, a significant portion of the company’s revenues comes from the sale of semiconductors. It is a cyclical industry characterized by changes in technology and manufacturing capacity and is subject to significant market upturns and downturns.
Avnet’s leading position in electronics distribution, continuous cost cutting initiatives and acquisition synergies are encouraging. However, competition from Arrow Electronics Inc. ARW and Ingram Micro remains a headwind.
Earnings Whispers
Our proven model does not conclusively show that Avnet will beat earnings this quarter. This 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: Avnet’s Earnings ESP is -1.87% as the Most Accurate estimate of $1.05 is pegged lower than the Zacks Consensus Estimate of $1.07.
Zacks Rank: Avnet has a Zacks Rank #3 (Hold). Though Zacks Rank #1, 2 or 3 increases the predictive power of ESP, the company’s ESP of -1.87% makes a 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.
Stocks to Consider
Here are some companies which you may consider, as our model shows they have the right combination of elements to post an earnings beat this quarter:
Walker & Dunlop, Inc. WD, with an Earnings ESP of +5.77% and a Zacks Rank #1 (Strong Buy)
Agrium Inc. AGU, with an Earnings ESP of +0.62% and a Zacks Rank #3
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