Cypress Semiconductor Corporation CY is set to report first-quarter 2015 results on Apr 30. Last quarter, it posted a 28.6% positive earnings surprise. Let’s see how things are shaping up for this announcement.
Factors at Play
Cypress is a semiconductor company that offers high-performance, mixed signal and programmable solutions. The company’s fourth-quarter earnings of 9 cents per share beat the Zacks Consensus Estimate by a couple of centson the back of solid expense control. However, revenues were down sequentially due to weakness in all its divisions, except the Programmable Systems Division (PSD).
Gross margins of 50.9% were down 80 basis points (bps) sequentially due to lower factory utilization and unfavorable product and customer mix.
The company’s merger with Spansion will further strengthen its leading position in the semiconductor memory chip market. The merger is expected to create a global provider of microcontrollers and specialized memory chips for embedded systems and generate more than $2 billion in annual revenues. Additionally, the company’s advanced technology, growth in the automotive and industrial markets and momentum in new products are likely to aid first-quarter results.
For the first quarter, Cypress expects revenues in the range of $175.0–$180.0 million, and gross margin to be down slightly to 51%, which will vary with manufacturing product mix. Non-GAAP earnings per share are likely to range within 8–10 cents.
Earnings Whispers
Our proven model does not conclusively show that Cypress is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESPand 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 1 cent. Hence, the difference is 0.00%.
Zacks Rank: Cypress’ Zacks Rank #1 (Strong Buy) increases the predictive power of ESP. However, we need to have a positive ESP to be confident of an earnings beat.
We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Stocks to Consider
You could consider the following stocks with a positive Earnings ESP and a favorable Zacks Rank:
Imperial Oil Ltd. IMO, with an Earnings ESP of +160.0% and a Zacks Rank #1.
Boston Beer Co. Inc. SAM, with an Earnings ESP of +1.45% and a Zacks Rank #1.
Popular, Inc. BPOP, with an Earnings ESP of +18.84% and a Zacks Rank #1.
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