Cypress Semiconductor Corporation (CY) is set to report third-quarter 2014 results on Oct 16. Last quarter, it posted a 41.7% positive surprise. Let’s see how things are shaping up for this announcement.
Factors this Past Quarter
Cypress’ second-quarter earnings of 8 cents per share beat the Zacks Consensus Estimate on the back of higher gross margins and solid expense control. Also, revenues were up sequentially backed by improvement in all divisions, especially continued higher demand for TrueTouch products and strength in automotive and industrial markets.
Gross margins were up 640 basis points (bps) sequentially and 480 bps from the year-ago quarter due to favorable product and customer mix.
For the third quarter, Cypress expects revenues in the range of $185.0–$191.0 million, and gross margin to be down slightly to 53%, which will vary with manufacturing product mix. Non-GAAP earnings per share are likely to range within 15–17 cents.
Earnings Whispers?
Our proven model does not conclusively show that Cypress is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESPand 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 8 cents. Hence, the difference is 0.00%.
Zacks Rank: Cypress’ Zacks Rank #2 (Buy) 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.
Other Stocks to Consider
You could consider other stocks with a positive Earnings ESP and a favorable Zacks Rank such as:
United Insurance Holdings (UIHC), with an Earnings ESP of +2.70% 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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