Leading semiconductor solutions maker Broadcom Corp. BRCM is scheduled to report its first-quarter 2015 results after the market closes on Apr 21.
Broadcom’s track record has been impressive over the past few quarters, with the company beating earnings estimates for five straight quarters. In the last reported quarter, it registered a positive earnings surprise of 8.6%, with an average earnings surprise over the last four quarters of 15.6%.
Let’s have a look at how things are shaping up for the first quarter results.
Factors to Consider This Quarter
Fuelled by the broadband communications explosion, Broadcom has enjoyed robust growth since its inception. The company is well-placed in the fast-growing wired and wireless communications markets, with cutting-edge solutions for a growing number of connected users who are demanding more content and bandwidth. Strong demand for smartphones and tablets are catalysts for the company’s growth, and will likely boost the company’s top line.
As customers like Samsung, Cisco and Apple ramp new products such as iPhone6 and the Galaxy series, Broadcom stands to benefit from increased demand for its products. It is also broadening its connectivity business beyond smartphones into adjacent markets and powering with both Denon and Harman Kardon's WiFi home audio systems.
During the quarter, Broadcom rolled out SoC (System on Chip) and othersolutions specifically engineered to address the continued expansion of HD programming in China.
It also launched a new smartwatch platform that is designed to facilitate better power efficiency for Android Wear devices. The platform uses a smaller form factor, thus improving performance and functioning as smaller processors perform simple tasks with very little energy consumption.
The wearable market constitutes a fast growing segment of the larger Internet of things (IoT) and is expected to be worth $80 billion by 2020. Broadcom’s new platform addresses a key issue of battery drain in wearables, translating into huge prospects for the same. These initiative highlight the excellent growth prospects of the company.
Some time back, Broadcom began to execute the wind-down of its cellular base-band business. This is likely to reduce about $700 million in R&D and selling, general and administrative expenses annually, and will be beneficial to the company’s bottom line.
Earnings Whispers
Our proven model shows that Broadcom is likely to beat earnings because it has the right combination of two key ingredients.
Positive Zacks ESP: Earnings Surprise Prediction or Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is currently pegged at +5.00%. This is very meaningful and a leading indicator of a likely positive earnings surprise for shares.
Zacks Rank #1 (Strong Buy): Note that stocks with Zacks Ranks of #1, #2 and #3 have a significantly higher chance of beating earnings. The sell-rated stocks (#4 and #5) should never be considered going into an earnings announcement.
The combination of Broadcom’s Zacks Rank #1 and positive ESP makes us very confident of an earnings beat on Apr 21.
Other Stocks That Warrant a Look
Here are some companies in the Computer & Technology space that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Infinera Corporation INFN has an Earnings ESP of +20.00% and carries a Zacks Rank #1. It is scheduled to report results on Apr 21.
Apple Inc. AAPL has an Earnings ESP of +6.05% and carries a Zacks Rank #2 (Buy). It is scheduled to report results on Apr 27.
SBA Communications Corp. SBAC has an Earnings ESP of +38.46% and carries a Zacks Rank #2. It is scheduled to report results on Apr 23.
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