InvenSense, Inc. (INVN) is set to report third-quarter fiscal 2015 results on Jan 29. Last quarter, it posted a 130.0% negative earnings surprise. Let’s see how things are shaping up for this announcement.
Factors at Play
InvenSense reported a loss of 3 cents per share in the second quarter comparing unfavorably with the Zacks Consensus Estimate of earnings of 10 cents. However, revenues of $90.2 million were up 35% sequentially and 27% year over year driven by contributions from the Trusted Positioning and Movea SA acquisitions.
Gross margins were down 1,200 basis points (bps) sequentially due to unfavorable mix.
We believe InvenSense’s recent acquisitions position it as a leading supplier of sensor system solutions. Additionally, the company’s chips, which are used in smartphones, tablets, console and portable video gaming devices, could increase its revenue base. We believe that the company’s new products, design wins with its 6-axis MotionTracking Solutions and OIS products would aid the results in the to-be-reported quarter.
Earnings Whispers
Our proven model does not conclusively show that InvenSense is likely to 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 13 cents. Hence, the difference is 0.00%.
Zacks Rank: InvenSense’s Zacks Rank #3 (Hold) when combined with a 0.00% ESP, makes surprise prediction difficult.
We caution against stocks with Zacks Ranks #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 other stocks with a positive Earnings ESP and a favorable Zacks Rank such as:
The Allstate Corporation (ALL), with an Earnings ESP of +1.81% and a Zacks Rank #1 (Strong Buy).
Spirit AeroSystems Holdings, Inc. (SPR), with an Earnings ESP of +7.79% and a Zacks Rank #1.
BofI Holding, Inc. (BOFI), with an Earnings ESP of +4.17% and a Zacks Rank #1.
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