Applied Materials, Inc. (AMAT) is set to report the fiscal fourth-quarter 2014 results on Nov 13. Last quarter, the company posted a 3.7% positive surprise. Let’s see how things are shaping up for this announcement.
Factors at Play
The company’s third-quarter earnings beat the Zacks Consensus Estimate driven by higher gross margins. However, revenues of $2.27 billion were down 3.7% sequentially and missed the Zacks Consensus Estimate of $2.29 billion due to the weakness in Silicon and Display segments.
The third quarter was strong for Applied Materials in terms of margin growth, driven by an improving mix of higher-value products in semiconductor and display as well as material cost efficiencies
For the fourth quarter, Applied Materials expects revenues to be flat to +/- 3% sequentially with non-GAAP earning per share coming within the 25–29 cents range.
Earnings Whispers?
Our proven model does not conclusively show that Applied Materials 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 27 cents. Hence, the difference is 0.00%.
Zacks Rank: Appliedhas 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.
Stocks to Consider
You could consider the following stocks with a positive Earnings ESP and a favorable Zacks Rank such as:
CST Brands, Inc. (CST), with an Earnings ESP of +7.84% and a Zacks Rank #1 (Strong Buy).
Best Buy Co., Inc. (BBY), with an Earnings ESP of +4.17% and a Zacks Rank #1.
Frontline Ltd. (FRO), with an Earnings ESP of +133.33% and a Zacks Rank #2 (Buy)
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