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Semiconductor Stocks Q3 Earnings on Nov 1: CAVM & IPHI
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We are in the thick of the Q3 earnings season, with more than 1000 companies set to report results this week, including 130 S&P 500 members. Notably, after five consecutive quarters of decline, earnings are finally back into the positive territory.
As per the latest Zacks Earnings Preview report, overall third-quarter earnings for S&P 500 companies are anticipated to be up by 2% (compared with an earlier estimate of a rise of 1.4%) from the year-ago quarter on revenues that are estimated to increase 1.4%.
The growth is expected to be driven by robust performance from big names in the finance space like J.P. Morgan and Goldman Sachs. Finance’s impressive show is anticipated to mitigate sluggish growth from the Energy, Autos, Transportation as well as Technology sectors.
However, technology earnings growth is expected to remain muted due to disappointing results from Apple (AAPL - Free Report) . Although the iPhone maker beat fourth-quarter 2016 earnings estimates by a penny, we note that earnings declined 15% on a year-over-year basis as revenues fell 9.9%.
We now have third-quarter results from 72.2% of the sector’s total market capitalization in the S&P 500 index. So far, total earnings are up1.6% year over year on 1.5% higher revenues, with 87.5% beating earnings estimates and 75% beating revenue expectations.
Earnings for the technology sector are now anticipated to be up 2.9% in spite of 1% lower revenues.
Semiconductors comprise an important component of the technology sector and are expected to follow the same earnings growth trajectory in the quarter. The industry has been struggling for sometime due to a slowdown in China, strengthening dollar and a secular decline in the PC market.
Here, we take a look at two semiconductor companies set to report earnings on Nov 1:
Cavium, Inc. is unlikely to beat third-quarter 2016 earnings estimates as it has an unfavorable combination of a Zacks Rank #3 (Hold) and Earnings ESP of 0.00%.
As per our proven model, a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 to beat earnings. We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into an earnings announcement, especially when the company is seeing negative estimate revisions.
Cavium operates in an increasingly competitive environment which can affect its earnings adversely. Increased pricing pressure, reduced profit margins, difficulty in selling products owing to competition are some factors that could have serious implications on its business.
However, the company’s recent merger with QLogic Corporation is likely to strengthen the strategic position of the company.
We note that Cavium’s results compared unfavorably with the Zacks Consensus Estimate in each of the last four quarters and it has an average negative surprise of 50.65%.
Inphi Corporation too is unlikely to beat third-quarter 2016 earnings estimates as it has an unfavorable combination of a Zacks Rank #3 and an Earnings ESP of 0.00%. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.
During the first half of the year, Inphi sold its memory business to Rambus to focus on being a pure communications company. Growing demand for high bandwidth and cloud, enterprise and service providers are likely to have a favorable impact on the company’s results this earnings season.
Management expects revenues from continuing operations to hover in the range of $66.8 million to $68.8 million in the to-be reported quarter, up 10.4% to 13.7% sequentially.
Notably, Inphi’s results have beaten the Zacks Consensus Estimate in the trailing four quarters and it has an average positive surprise of 58.33%.
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Semiconductor Stocks Q3 Earnings on Nov 1: CAVM & IPHI
We are in the thick of the Q3 earnings season, with more than 1000 companies set to report results this week, including 130 S&P 500 members. Notably, after five consecutive quarters of decline, earnings are finally back into the positive territory.
As per the latest Zacks Earnings Preview report, overall third-quarter earnings for S&P 500 companies are anticipated to be up by 2% (compared with an earlier estimate of a rise of 1.4%) from the year-ago quarter on revenues that are estimated to increase 1.4%.
The growth is expected to be driven by robust performance from big names in the finance space like J.P. Morgan and Goldman Sachs. Finance’s impressive show is anticipated to mitigate sluggish growth from the Energy, Autos, Transportation as well as Technology sectors.
However, technology earnings growth is expected to remain muted due to disappointing results from Apple (AAPL - Free Report) . Although the iPhone maker beat fourth-quarter 2016 earnings estimates by a penny, we note that earnings declined 15% on a year-over-year basis as revenues fell 9.9%.
We now have third-quarter results from 72.2% of the sector’s total market capitalization in the S&P 500 index. So far, total earnings are up1.6% year over year on 1.5% higher revenues, with 87.5% beating earnings estimates and 75% beating revenue expectations.
Earnings for the technology sector are now anticipated to be up 2.9% in spite of 1% lower revenues.
Semiconductors comprise an important component of the technology sector and are expected to follow the same earnings growth trajectory in the quarter. The industry has been struggling for sometime due to a slowdown in China, strengthening dollar and a secular decline in the PC market.
However, encouraging results from dominant players like Texas Instruments (TXN - Free Report) and Intel (INTC - Free Report) are encouraging. Both the companies currently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Here, we take a look at two semiconductor companies set to report earnings on Nov 1:
Cavium, Inc. is unlikely to beat third-quarter 2016 earnings estimates as it has an unfavorable combination of a Zacks Rank #3 (Hold) and Earnings ESP of 0.00%.
As per our proven model, a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 to beat earnings. We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into an earnings announcement, especially when the company is seeing negative estimate revisions.
Cavium operates in an increasingly competitive environment which can affect its earnings adversely. Increased pricing pressure, reduced profit margins, difficulty in selling products owing to competition are some factors that could have serious implications on its business.
However, the company’s recent merger with QLogic Corporation is likely to strengthen the strategic position of the company.
CAVIUM INC Price and EPS Surprise
CAVIUM INC Price and EPS Surprise | CAVIUM INC Quote
We note that Cavium’s results compared unfavorably with the Zacks Consensus Estimate in each of the last four quarters and it has an average negative surprise of 50.65%.
Inphi Corporation too is unlikely to beat third-quarter 2016 earnings estimates as it has an unfavorable combination of a Zacks Rank #3 and an Earnings ESP of 0.00%. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.
During the first half of the year, Inphi sold its memory business to Rambus to focus on being a pure communications company. Growing demand for high bandwidth and cloud, enterprise and service providers are likely to have a favorable impact on the company’s results this earnings season.
Management expects revenues from continuing operations to hover in the range of $66.8 million to $68.8 million in the to-be reported quarter, up 10.4% to 13.7% sequentially.
INPHI CORP Price and EPS Surprise
INPHI CORP Price and EPS Surprise | INPHI CORP Quote
Notably, Inphi’s results have beaten the Zacks Consensus Estimate in the trailing four quarters and it has an average positive surprise of 58.33%.
Looking for Ideas with Even Greater Upside?
Today's investment ideas are short-term, directly based on our proven 1 to 3 month indicator. In addition, I invite you to consider our long-term opportunities. These rare trades look to start fast with strong Zacks Ranks, but carry through with double and triple-digit profit potential. Starting now, you can look inside our home run, value, and stocks under $10 portfolios, plus more. Click here for a peek at this private information >>