Advanced Micro Devices, Inc. (AMD)is set to report third-quarter 2014 results on Oct 16. Last quarter, the company posted 8.3% negative surprise. Let’s see how things are shaping up for this announcement.
Growth Factors this Past Quarter
Advanced Micro’s second-quarter earnings of 2 cents missed the Zacks Consensus Estimate by a penny due to weak consumer PC market. However, revenues were up sequentially as well as year over year, driven by strong sales of semi-custom System-on-chips (SoCs) and notebook offerings.
Margins of 76% were down 30 basis points (bps) sequentially and 490 bps from the year-ago quarter due to unfavorable product mix.
For the third quarter, management expects revenues in the range of $1.43–$1.51 billion, an increase of 2% (+/- 3%) sequentially. Non-GAAP gross margin is expected to be 35%. Operating expenses are predicted to be approximately $435.0 million and interest expense approximately $42 million.
Earnings Whispers?
Our proven model does not conclusively show that Advanced Micro will beat earnings this quarter. That 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 4 cents. Hence, the difference is 0.00%.
Zacks Rank: Advanced Micro carries a Zacks Rank #4 (Sell).
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.
Other Stocks to Consider
You could consider other stocks with a positive earnings ESP and a Zacks Rank #1, 2 or 3 such as:
Chipotle Mexican Grill, Inc. (CMG), with an Earnings ESP of +1.30% and a Zacks Rank #1 (Strong Buy).
Curtiss-Wright Corporation (CW), with an Earnings ESP of +2.30% and a Zacks Rank #1.
PrivateBancorp, Inc. (PVTB), with an Earnings ESP of +2.13% and a Zacks Rank #1.
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