Integrated Device Technology, Inc. (IDTI) is set to report third-quarter fiscal 2015 results on Feb 2. Last quarter, the company posted a 5.9% positive earnings surprise. Let’s see how things are shaping up for this announcement.
Factors this Past Quarter
Integrated Device’s second-quarter earnings of 18 cents missed the Zacks Consensus Estimate by a penny. However, revenues were up sequentially as well as year over year, driven by strong demand across all its end markets and increasing market share gains.
The company’s differentiated products in wireless infrastructure, high-performance computing and consumer segments, which include wireless charging, continues to gain momentum. Particularly, in the communications end market, 4G ordering patterns remain steady. Additionally, first orders were placed for the new 4G FDD — deployed in China in the last quarter — which could boost revenues in the to-be-reported quarter.
Margins of 59.7% were up 110 basis points (bps) sequentially and 270 bps from the year-ago quarter due to higher volumes and a favorable product mix.
For the third quarter of fiscal 2015, management expects revenues in the range of $138–$146 million, up 3.5% sequentially and 14% year over year.
Earnings Whispers
Our proven model does not conclusively show that Integrated Device 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 20 cents. Hence, the difference is 0.00%.
Zacks Rank: Integrated Device’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
Investors could consider the following stocks with a positive Earnings ESP and a favorable Zacks Rank:
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.
Allegiant Travel Company (ALGT), with an Earnings ESP of +7.37% and a Zacks Rank #1.
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