Linear Technology (LLTC) is set to report second-quarter fiscal 2015 results on Jan 13. Last quarter, the company posted 1.9% negative surprise. Let’s see how things are shaping up for this announcement.
Factors to Consider
Linear’s first-quarter earnings of 53 cents missed the Zacks Consensus Estimate by a penny. The results were impacted by a higher income tax rate, partially offset by higher volumes and lower interest expense. However, revenues were up sequentially as well as from the year-ago quarter driven by stronger sales across automotive, industrial and communication markets.
Also, margins of 76% were flat sequentially but up 90 basis points from the year-ago quarter.
For the second quarter, management expects revenues to decrease 3% to 6% sequentially but increase 4% to 8% year over year.
Earnings Whispers?
Our proven model does not conclusively show that Linear 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 49 cents. Hence, the difference is 0.00%.
Zacks Rank: Linear’s Zacks Rank #3 (Hold) 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.
Stocks to Consider
You could consider the following stocks with a positive Earnings ESP and a favorable Zacks Rank:
United Continental Holdings, Inc. (UAL), with an Earnings ESP of +0.84% and a Zacks Rank #1 (Strong Buy).
Southwest Airlines Co. (LUV), with an Earnings ESP of +3.70% and a Zacks Rank #1.
Janus Capital Group, Inc. (JNS), with an Earnings ESP of +5.00% and a Zacks Rank #1.
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