Microsemi Corporation MSCC is slated to report second-quarter fiscal 2015 results on Apr 23. In the last-reported quarter, Microsemi’s earnings came in line with the Zacks Consensus Estimate. Let’s see how things are shaping up for this announcement.
Factors to Consider
Microsemi is an original equipment manufacturer of a broad range of high-reliability and analog/mixed signal integrated circuits. The company’s first quarter fiscal 2015 adjusted earnings of 54 cents per share matched the consensus mark.
Per Microsemi’s second quarter guidance, revenues are expected to be flat to down 4.5% sequentially. Non-GAAP gross margin is expected to improve 30 to 50 basis points (bps) due to cost structure improvements. Earnings per share are expected within 64–68 cents, well above the Zacks Consensus Estimate of 57 cents.
Management estimates capital spending to be approximately $9 million.
The company’s focus on security and increasing electronic content per device and customer will eventually boost its market share. The company continues to consolidate select facilities to improve its long-term cost targets.
However, management will continue to invest in FPGAs and mixed signal RF product offerings, which might increase expenses, in turn impacting operating margins in the near term
Earnings Whispers
Our proven model does not conclusively show that Microsemi will 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: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at 55 cents. Hence, the difference is 0.00%.
Zacks Rank: Microsemi currently has a Zacks Rank #3 (Hold). While Zacks Rank #1, 2 or 3 increases the predictive power of ESP, the company’s ESP of 0.00% 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
Here are some companies you may want to consider as our model shows these have the right combination of elements to post an earnings beat:
Broadcom Corp. BRCM, with Earnings ESP of +5.00% and a Zacks Rank #1 (Strong Buy)
Infinera Corporation INFN, with Earnings ESP of +20.00% and a Zacks Rank #1
Cognex Corporation CGNX, with Earnings ESP of +4.35% and a Zacks Rank #1
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