What’s in Store for Energous (WATT) This Earnings Season?

Energous Corporation WATT is slated to report fourth-quarter 2018 results on Feb 27, before the market opens.

The company pulled off average positive earnings surprise of 7.04% over the preceding four quarters. Notably, Energous’ third-quarter 2018 adjusted loss of 49 cents per share was narrower than the Zacks Consensus Estimate of a loss of 53 cents.

Let’s see how things are shaping up prior to this announcement.

Factors at Play

Energous is gaining momentum on the back of its strength in major markets including China, Korea and Japan. Also, the company believes strength in the small form factor markets, like hearing aids, hearables as well as wearables will drive its revenues, moving forward. Notably, it is experiencing increased adoption of its WattUp Near Field transmitter technology from the hearing aid manufacturers, particularly in China and Korea. As a matter of fact, increase in the launches of WattUp-enabled products is likely to stoke growth in the quarter to be reported.

Moreover, Energous focuses on investing in potential markets to drive long-term growth. For instance, it is looking to invest in chip development, where it believes it has long-term potential. Also, in the field of its core technology, the company’s strategic partnerships with several consumer electronics company has advanced beyond development, exploration and testing to product engineering, over the past few quarters. This is likely to pave the way for global and regional launches of its technology-enabled products and strengthen its long-term growth potential.

However, rising operating expenses have been a major concern for Energous. The company's net non-GAAP operating expenses totaled $8.8 million, an increase of 8.6% year over year in third quarter of 2018. Also, the metric increased 11.4% on a sequential basis. The company anticipates its engineering costs to peak in the fourth quarter, primarily due to its increased investments related to the chip development. As a matter of fact, high engineering expenses are likely continue to escalate costs, in turn, hurting the company’s profitability.

Although, international operations are reflective of Energous’ prosperity, it has exposed the company to risks arising from unfavorable movements in foreign currencies and geopolitical issues. In addition, in the past couple of months, the Zacks Consensus Estimate has remained stable for 2018 earnings at a loss of $2.

Earnings Whispers

Our proven model provides some idea on the stocks that are about to release earnings results. Per the model, a stock needs to have a combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

The case with Energous is given below:

Earnings ESP: It has an Earnings ESP of 0.00% as both the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at a loss of 48 cents.

Zacks Rank: Energous carries a Zacks Rank #3, which increases the predictive power of ESP. However, its 0.00% ESP makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Key Picks

Here are some companies from the same space you may want to consider as our model shows that these have the right combination of elements to beat estimates this earnings season:

Axon Enterprise, Inc AAXN has an Earnings ESP of +9.09% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Lindsay Corporation LNN has an Earnings ESP of +5.69% and a Zacks Rank #3.

Tenaris S.A. TS has an Earnings ESP of +4.76% and a Zacks Rank #3.

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