Leading microcontroller and touch solutions provider Atmel Corporation (ATML) is scheduled to report its third-quarter 2014 results after the closing bell on Oct 29. In the last reported quarter, recurring earnings with employee stock option adjustments failed to spring any surprise and exactly matched with the Zacks Consensus Estimate. Let’s see how things are shaping up for this announcement.
Growth Factors in the Third Quarter
During the quarter, Atmel acquired Wi-Fi and Bluetooth solutions manufacturer Newport Media, Inc. to gain a greater share of the ‘Internet of Things (IoT)’ market by leveraging on a comprehensive portfolio of smart connected devices. The transaction added Newport Media's 802.11n Wi-Fi and Bluetooth certified products in Atmel’s kitty to augment its already-broad SmartConnect wireless portfolio for faster and seamless connectivity.
The enriched assortment of products offered a broad spectrum of applications including industrial, home and building automation, and consumer products that require smaller form factors and longer battery life.
At the same time, Atmel introduced two new turn-key system-on-chips (SoCs) and four new modules featuring these SoCs to offer compatible solutions for battery-powered IoT applications. These products will allow OEMs (original equipment manufacturers) and small developers to streamline the production of IoT devices that are smaller, easier to use, faster and more powerful with low power consumption and optimized battery performance.
The IoT market is expected to be one of the largest growth opportunities for the semiconductor industry over the next several years. According to data by research agency International Data Corporation, the global IoT market is likely to expand manifold to $7.1 trillion by 2020, as more and more people develop an affinity for full-time connectivity.
The worldwide IoT installed base is expected to have a compound annual growth rate of 17.5% from 2013 to 2020 with a wide proliferation across the full breadth of the IoT ecosystem. With continued investments in this sphere, Atmel is likely to generate significant revenue in the quarter to fuel its growth engine.
Earnings Whispers
Despite core business focus, our proven model does not conclusively show that Atmel is likely to beat earnings this quarter as it lacks the key ingredients for a success recipe.
Zero Zacks ESP: Expected Surprise Prediction or Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is currently pegged at 0.00%. This indicates a likely in line earnings for the shares.
Zacks Rank #3 (Hold): Atmel’s Zacks Rank #3 when combined with 0.00% Expected Surprise Prediction reduces the predictive power of ESP. Note that stocks with Zacks Ranks of #1, #2 and #3 have a significantly higher chance of beating earnings. The Sell rated stocks (#4 and #5), however, should never be considered going into an earnings announcement.
Other Stocks to Consider
Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Compass Diversified Holdings (CODI), earnings ESP of +20.00% and Zacks Rank #2 (Buy).
Century Aluminum Co. (CENX), earnings ESP of +11.77% and Zacks Rank #1 (Strong Buy).
Alnylam Pharmaceuticals, Inc. (ALNY) earnings ESP of +9.23% and Zacks Rank #2 (Buy).
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