We expect DTS Inc. DTSI to beat expectations when it reports third-quarter 2015 results on Nov 9.
Why a Likely Positive Surprise?
Our proven model shows that DTS is likely to beat earnings because it has the right combination of two key ingredients.
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +23.08%. This is very meaningful and a leading indicator of a likely earnings surprise.
Zacks Rank: DTS has a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 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.
The combination of DTS’ Zacks Rank #3 and +23.08% ESP makes us very confident in looking for an earnings beat.
What's Driving the Better-than-Expected Earnings?
We believe that DTS will continue to gain market share backed by strong product portfolio, increasing online availability and accelerated expansion of DTS technology into new markets, such as smartphones, portable devices, digital media players and network-connected TV space. Moreover, the company continues to invest in the network connected business, which will help it to gain significant market traction which should boost the results in the third quarter.
However, the ongoing volatile macroeconomic environment, weakness in the consumer electronics market and sluggish consumer spending are the near-term headwinds. Moreover, higher costs are likely to hurt profitability in the third quarter.
In the last quarter, DTS announced the acquisition of iBiquity Digital Corporation, thus expanding the platform for providing high quality audio solutions and experiences across the entertainment spectrum. This deal should be accretive almost immediately and drive both strategic and financial synergy over the long time.
Other Stocks to Consider
DTS is not the only firm looking up this earnings season. We also see likely earnings beats coming from these three companies:
PennantPark Investment Corp. PNNT, with an Earnings ESP of +3.70% and a Zacks Rank #1.
Agilent Technologies Inc. A, with an Earnings ESP of +2.13% and a Zacks Rank #2.
Ameren Corp. AEE, with an Earnings ESP of +1.53% and a Zacks Rank #2.
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