NVIDIA Corporation (NVDA) is set to report fourth quarter fiscal 2015 results on Feb 11. Last quarter, the company posted a positive earnings surprise of 13.8%. Moreover, it is worth noting that NVIDIA has outperformed the Zacks Consensus Estimate in all the four preceding quarters with an average positive surprise of 34.2%.
Let us see how things are shaping up for this announcement.
Growth Factors this Quarter
NVIDIA reported better-than-expected third-quarter fiscal 2015 results, primarily due to lower operating expenses as a percentage of revenues and higher growth in Tegra Processor, SHIELD tablet sales, GeForce GPU and Tesla sales. The company also gained significant traction in the Tegra segment.
Recently, NVIDIA’s CEO Jen-Hsun Huang announced the launch of 256-core Tegra X1 mobile processor at the International Consumer Electronics Show (CES) 2015. The "mobile super chip" is built on the Maxwell GPU architecture, which provides an enhanced gaming experience for users. With the launch of the CUDA-core Tegra X1, NVIDIA will be able to increase its customer base and garner additional revenues.
We believe that NVIDIA's innovative product pipeline and strength in gaming and high-end notebook GPUs remain its strengths. Also, the stabilization in the PC market would positively impact the GPU segment. Higher adoption rate of NVIDIA's Tegra processors should also act as a catalyst, going forward.
Nonetheless, competition from the likes of Intel and QUALCOMM Inc. remains a near-term headwind.
Earnings Whispers?
Our proven model does not conclusively show that NVIDIA 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 29 cents. Hence, the difference is 0.00%.
Zacks Rank: NVIDIA carries a Zacks Rank #3 (Hold) which 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.
Other Stocks to Consider
Here are some other companies, which you may consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:
Procera Networks, Inc. (PKT) with Earnings ESP of +25.00% and a Zacks Rank #2 (Buy)
Criteo SA (CRTO) with Earnings ESP of +4.00% and a Zacks Rank #3
Demandware, Inc. (DWRE) with Earnings ESP of +25.00% and a Zacks Rank #3
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