OmniVision Technologies, Inc. OVTI is set to report fiscal fourth-quarter 2015 results on May 28. Last quarter, it posted a 71.43% positive surprise. Let’s see how things are shaping up for this announcement.
Factors at Play
The company reported encouraging third-quarter results with both the top- and bottom-line figures beating the Zacks Consensus Estimate.
OmniVision has consistently been solidifying its position in the handset market and expanding into other areas by leveraging its advanced technology.
Given OmniVision’s product roadmap, growth prospects, cost structure improvement, market diversification and management execution, it will be able to deal with the short product life cycles.
The mobile market, especially in China, India and Korea continues to show strong growth trends. The company already has a strong position in China, which is the manufacturing destination for many phone-makers across the world. The local Indian market is looking up and the company has increased investment in the region.
Management also mentioned an important customer win in Korea, so growth prospects look bright. Additionally, management said that the slowdown in China related to technology transition and inventory accumulation had probably run its course, so the business may be expected to look up going forward.
Automobile OEMs are rapidly deploying camera sensors in vehicles such as rearview and surround view. OmniVision has gained significant market share in the Chinese market, which is a major positive.
As OmniVision continues its growth momentum in Asia and other emerging economies, it can result in volatility in the company’s financial results, at least in the near-term.
Earnings Whispers?
Our proven model does not conclusively show that OmniVision 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 6 cents. Therefore, the Earnings ESP for the stock is 0.00%.
Zacks Rank: OmniVision has 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.
Stocks to Consider
You can consider the following stocks with a favorable combination of a positive Earnings ESP and Zacks Rank #1, 2 or 3:
Avago Technologies Limited AVGO with Earnings ESP of +1.64% and a Zacks Rank #2 (Buy).
Royal Bank of Canada RY with Earnings ESP of +0.77% and a Zacks Rank #2.
Bank of Montreal BMO with Earnings ESP of +0.74% and a Zacks Rank #2.
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