Semiconductor manufacturer Skyworks Solutions Inc. SWKS is scheduled to report fourth-quarter fiscal 2015 results after the closing bell on Nov 5. In the last reported quarter, quarterly earnings beat the Zacks Consensus Estimate by 2 cents. Let’s see how things are shaping up for this announcement.
Factors to Consider
During the soon-to-be-reported quarter, Skyworks inked a definitive agreement to acquire PMC-Sierra Inc. PMCS for $11.60 per share. Although the all-cash transaction is expected to close in the first half of the calendar 2016, it is expected to have some effect on the impending results.
The acquisition will expand Skyworks’ product portfolio to better serve some of the fastest growing segments in the technology market, including cloud storage and optical networking. In addition to incremental revenues, the acquisition is likely to reap synergistic benefits to the tune of $75 million, resulting in accretive non-GAAP earnings of 75 cents per share on an annual basis for Skyworks. PMC-Sierra’s state-of-the-art storage systems, flash controllers, optical switches and network infrastructure solutions are further likely to cement Skyworks’ position as a premier diversified analog, RF and mixed-signal semiconductor manufacturer.
At the same time, Skyworks continues to capitalize on three business segments − mobile Internet, vertical markets and analog components. As demand for mobile Internet applications is exploding with the broad proliferation of smartphones, net books, note books, caplets and other forms of embedded wireless devices, Skyworks continues to gain traction.
Perfect quality, environmentally friendly products and sustainable business practices are key differentiators for the company. Skyworks is also aggressively expanding into new vertical markets and is investing heavily to increase its footprint in traditional analog segments like automotive, medical and industrial. These are highly attractive markets with longer product life cycles, fewer competitors and higher margins.
Earnings Whispers
Our proven model shows that Skyworks is likely to beat earnings this quarter as it possesses the key ingredients for a success recipe.
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is currently pegged at +0.72%. This indicates a likely earnings beat for the company.
Zacks Rank: Skyworks’ Zacks Rank #2 (Buy) combined with a positive ESP increases the predictive power of ESP, which is highly skewed to an earnings beat. Note that stocks with a Zacks Ranks of #1 (Strong Buy), #2 and #3 (Hold) have a significantly higher chance of beating earnings. The Sell rated stocks (#4 or 5) should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.
Other Stocks to Consider
Here are some other 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:
Callon Petroleum Co. CPE has an Earnings ESP of +66.67% and carries a Zacks Rank #2.
Aquinox Pharmaceuticals Inc. AQXP has an Earnings ESP of +43.90% and holds a Zacks Rank #1.
Merrimack Pharmaceuticals, Inc. MACK has an Earnings ESP of +2.44% and carries a Zacks Rank #3.
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