OmniVision Technologies, Inc. OVTI is set to report fiscal second-quarter 2016 results on Dec 3. Last quarter, the company posted a 29.17% positive earnings surprise.
Let’s see how things are shaping up for this announcement.
Factors at Play
OmniVision reported encouraging first-quarter results with both the top line and the bottom line surpassing the respective Zacks Consensus Estimate.
Revenues of $329.9 million, however, dropped 18.9% from the year-ago quarter. Margins improved both sequentially and year over year backed by favorable product mix shift toward the company’s newer and higher resolution products, as well as productivity improvements, which lowered the cost of production. We expect the trend to continue in the second quarter as well.
Omnivision has consistently strengthened its position in the handset market and expanded into other areas by leveraging its advanced technology.
The mobile market, especially in China, India and Korea, continues to show strong growth trends. The company already has a solid presence in China, the manufacturing destination for many phone-makers across the world. The local Indian market is looking up where the company has stepped up investment. These should boost results in the to-be-reported quarter.
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. But we expect it to witness long-term growth.
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 (Strong Buy), 2 (Buy) or 3 (Hold) 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 18 cents. Therefore, the Earnings ESP for the stock is 0.00%.
Zacks Rank: OmniVision has a Zacks Rank #3 which when combined with a 0.00% ESP makes surprise prediction difficult.
We caution against stocks with a 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
You can consider the following stocks with a favorable combination of a positive Earnings ESP and favorable Zacks Rank:
Casey's General Stores, Inc. CASY, with an Earnings ESP of +2.08% and a Zacks Rank #1.
Toll Brothers Inc. TOL, with an Earnings ESP of +6.02% and a Zacks Rank #3.
Peregrine Pharmaceuticals, Inc. PPHM, with an Earnings ESP of +11.11% and a Zacks Rank #3.
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