Tessera Technologies Inc. TSRA is slated to report third-quarter 2015 results on Nov 3. In the last-reported quarter, Tessera recorded a positive earnings surprise of 25.00%. Let’s see how things are shaping up for this announcement.
Factors to Consider
Tessera posted an increase in recurring revenues in the second quarter, which reflects the company’s successful settlement of the long-standing disputes and its focus on alliances with customers. The company is now generating license revenues from Micron Technology, Inc., and witnessing continued growth from FotoNation.
The company has lowered its operating expenses, increased technical collaboration, redirected investment to areas with growth potential and secured several patent licensing agreements and design wins. All these factors are expected to drive the company’s results in the to-be reported quarter.
For the third quarter of 2015, Tessera expects revenues in the range of $64–$66 million. GAAP earnings per share are expected to be between 46 cents and 48 cents, while non-GAAP earnings per share are likely to be within the 55–57 cents range.
Tessera had posted strong second quarter results with both the top and bottom lines exceeding the Zacks Consensus Estimate. Revenues were down 19.6% sequentially but up 72.5% year over year. The sequential decrease was basically due to a fall in episodic revenues, which was partially offset by growth in recurring revenues.
Earnings Whispers?
Our proven model does not conclusively show that Tessera will beat estimates 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: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at 51 cents. Hence, the difference is 0.00%.
Zacks Rank: Tessera’s Zacks Rank #3 (Hold) 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 companies, which you may want to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:
Facebook, Inc. FB, with Earnings ESP of +5.71% and a Zacks Rank #1 (Strong Buy)
Agilent Technologies Inc. A, with Earnings ESP of +2.13% and a Zacks Rank #2 (Buy)
CyberArk Software, Ltd. CYBR, with Earnings ESP of +10.00% and a Zacks Rank #2
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