NVIDIA Corporation NVDA is set to report third-quarter fiscal 2016 results on Nov 5. Last quarter, the company posted a positive earnings surprise of 136.4%. Let's see how things are shaping up for this announcement.
Factors to Consider
We believe that NVIDIA’s innovative product pipeline and strength in gaming and high-end notebook GPUs keep it well positioned. We also believe that higher adoption of NVIDIA’s Tegra processors could act as a catalyst in the to-be reported quarter.
Nonetheless, the continuous decline in PC sales is a cause of concern for NVIDIA’s GPU segment. Competition from the likes of Intel INTC and QUALCOMM Inc. also remains a near-term headwind.
NVIDIA posted better-than-expected second-quarter fiscal 2016 results. Also, revenues increased year-over-year primarily due to growth in GTX gaming platform, data center, high-performance computing, cloud and automotive platforms.
Earnings Whispers?
Our proven model does not conclusively show that NVIDIA will beat earnings 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: This is because the Most Accurate estimate is pegged at 24 cents while the Zacks Consensus Estimate is poised at 25 cents. This translates to an ESP of -4.00% for NVIDIA.
Zacks Rank: NVIDIA’s Zacks Rank #3 (Hold) when combined with a negative ESP makes surprise prediction difficult.
We caution against stocks with Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Stocks to Consider
Here are some companies, which you may consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:
CDW Corporation CDW, with an Earnings ESP of +2.63% and a Zacks Rank #2 (Buy).
CenturyLink, Inc. CTL, with an Earnings ESP of +1.45% and a Zacks Rank #2
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