Violin Memory, Inc. (VMEM) is set to report the third-quarter fiscal 2015 (ended Oct 31, 2014) results on Nov 24. Last quarter, the company posted a 25.7% positive surprise. Let’s see how things are shaping up for this announcement.
Factors to Consider
Violin Memory’s second-quarter loss of 26 cents was narrower than the Zacks Consensus Estimate of a loss of 35 cents. Revenues were up 3% sequentially driven by product introductions. However, revenues were down 30% from the year-ago quarter.
Non-GAAP margins of 55% were up 300 basis points sequentially due to favorable product mix.
The restructuring program announced in the fiscal first quarter and strategic realignment helped the company to lower costs and drive strong top-line and bottom-line results in the reported quarter.
For fiscal 2015, management expects non-GAAP gross margin in the range of 52–56% and operating expenses in the $118–$122 million range.
Earnings Whispers?
Our proven model does not conclusively show that Violin Memory 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 a loss of 24 cents. Hence, the difference is 0.00%.
Zacks Rank: Violin Memory’s Zacks Rank #3 (Hold), when combined with a 0.00% ESP, makes surprise prediction difficult.
We caution against stocks with a 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:
The Kroger Co. (KR), with an Earnings ESP of +3.28% and a Zacks Rank #2 (Buy).
Esterline Technologies Corp. (ESL), with an Earnings ESP of +5.35% and a Zacks Rank #2.
Best Buy Co., Inc. (BBY), with an Earnings ESP of +1.52% and a Zacks Rank #2.
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