Violin Memory, Inc. VMEM is slated to report fourth-quarter 2015 results on Mar 5. In the last reported quarter, Violin recorded an earnings surprise of 0.00%. Let’s see how things are shaping up for this announcement.
Factors to Consider
Violin’s third-quarter revenue of $21.7 million beat the Zacks Consensus Estimate of $20 million while earnings were in line. Revenues were up 17% sequentially driven by increased sales and contributions from initial sales of Concerto. However, revenues fell 7% from the year-ago quarter.
The company exited the third quarter with a strong balance sheet. This combined with technology introductions and revenue growth has led to an increase in customer confidence in the company. Thus Violin’s business is beginning to accelerate with substantial progress being made in the primary storage business.
Management has provided an outlook for the soon-to-be-reported quarter. Revenues are expected to grow between 5% and 15% on a sequential basis and are likely to be in the range of $23–$25 million. Meanwhile, operating expenses are projected between $10 million and $15 million.
Earnings Whispers
Our proven model does not conclusively show that Violin is likely to beat earnings this quarter as it does not have the right combination of two key ingredients. 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: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, currently stands at 0.00% as both the estimates are currently pegged at a loss of 27 cents.
Zacks Rank: Violin currently carries a Zacks Rank #3 (Hold) generally increases the predictive power of ESP; but when combined with a 0.00% ESP, it 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.
Stocks that Warrant a Look
Douglas Dynamics, Inc. PLOW with an Earnings ESP of +13.33% and a Zacks Rank #1 (Strong Buy).
Superior Industries International, Inc. SUP with an Earnings ESP of +6.67% and a Zacks Rank #1.
TRI Pointe Homes, Inc. TPH with an Earnings ESP of +8.00% and a Zacks Rank #1.
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