InvenSense, Inc. INVN is set to report first-quarter fiscal 2016 results on Aug 4. Last quarter, it posted in line results. Let’s see how things are shaping up for this announcement.
Factors to Consider
InvenSense earnings matched the Zacks Consensus Estimate in the fourth quarter of fiscal 2015 while revenues beat the same. Revenues were down 14.3% sequentially but up 68.3% year over year. The increase was driven by strong demand for smartphones and tablets.
Gross margin for the quarter was 43.3%, down 20 basis points (bps) sequentially and 300 bps year over year due to lower volumes and an unfavorable mix.
InvenSense’s strong market position, compelling new products, superior product designs, continued innovation and increasing demand for new electronic gadgets should drive results for the upcoming quarter.
Additionally, with technological advancements, demand for smartphones, tablets, console and portable video gaming devices, digital still and video cameras, smart televisions, 3D mice and navigation devices is growing exponentially. InvenSense’s chips target all these and hence we believe that it will witness increased product demand in the to-be-reported quarter and beyond.
For the first quarter of fiscal 2016, InvenSense expects total revenue in the range of $100 million–$105 million, representing a sequential increase of 3.1% at the mid-point. The Zacks Consensus Estimate for the first quarter is pegged at $103 million. On a non-GAAP basis, gross margin is expected in the range of 45%–46%.
Earnings Whispers?
Our proven model does not conclusively show that InvenSense will beat estimates this quarter. This 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.
Negative Zacks ESP: The Most Accurate estimate stands at 3 cents while the Zacks Consensus Estimate is pegged higher at 4 cents. This translates to a difference of –25.00%.
Zacks Rank: InvenSense carries a Zacks Rank #4 (Sell). 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, which have a favorable combination of a positive Earnings ESP and a favorable Zacks Rank:
ZAGG Inc ZAGG, with Earnings ESP of +12.50% and a Zacks Rank #2
Sprint Corporation S with an Earnings ESP of +25.00% and a Zacks Rank #3 (Hold)
Interxion Holding NV INXN, with Earnings ESP of +6.67% and a Zacks Rank #3
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