KLA-Tencor Corporation KLAC is set to report first quarter fiscal 2016 results on Oct 21. Last quarter, it posted a 1.6% negative surprise. Let’s see how things are shaping up for this announcement.
Factors to Consider
KLA-Tencor reported modest fourth quarter results with the top line missing the Zacks Consensus Estimate while the bottom line surpassed the same. Revenues were up 2.4% sequentially and 3% from the year-ago quarter and were above the guided range of $550-750 million
The company remains focused on the memory side, particularly 3D NAND, with uncertainties continuing in other areas particularly logic.Uncertainties about the timing of capital equipment purchases are weighing on the company’s results. The biggest positive this calendar year (the company’s fiscal year ends in June) will be 3D NAND deployments by memory makers and FinFET transition at foundries. Logic will remain weak throughout.
In this environment, we think management cut headcount at just the right time and also announced a higher dividend to shareholders, which speaks of good execution.
For the first quarter of fiscal 2016, KLA expects orders of $450-650 million and shipments of $610-690 million. Quarterly revenues are expected to be between $595 million and $655 million. Non-GAAP EPS is expected in the range of 46 cents to 66 cents.
Earnings Whispers?
Our proven model does not conclusively show that Texas Instruments 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.
Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at 56 cents. Therefore, the Earnings ESP for the stock is 0.00%.
Zacks Rank: KLA-Tencor’s Zacks Rank #3 (Hold) 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, which have a favorable combination of a positive Earnings ESP and Zacks Rank #1, 2 or 3:
- Pandora Media, Inc. P with an Earnings ESP of +50.00% and a Zacks Rank #1 (Strong Buy)
- Agilent Technologies Inc. A with an Earnings ESP of +2.13% and a Zacks Rank #2 (Buy)
- T-Mobile US, Inc. TMUS with an Earnings ESP of +3.13% and a Zacks Rank #2
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