Advanced Micro (AMD): A Weak Earnings Season Yet Again?
Advanced Micro Devices, Inc. AMD is set to report fourth-quarter 2015 results on Jan 19. Last quarter, the company posted a 58.3% negative earnings surprise.
Let’s see how things are shaping up for this announcement.
Factors to Consider
Advanced Micro’s third-quarter breakeven results missed the Zacks Consensus Estimate due to weakness in the consumer PC market. This weakness combined with the decline in global PC demand could impact fourth-quarter results as well. However, revenues were up sequentially on the back of strong seasonal semi-custom and strong desktop processor and GPU sales.
Nevertheless, a more conducive market, increased game console wins, solid position in graphics and good execution should lower Advanced Micro’s dependence on the PC market. The company is diversifying its business into newer markets and increasing investments in its embedded business, which could boost profits in the to-be-reported quarter and beyond.
Earnings Whispers
Our proven model does not conclusively show that Advanced Micro 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: The Most Accurate estimate stands at a loss of 13 cents, while the Zacks Consensus Estimate is pegged at a loss of 12 cents. Hence, the difference is -8.33%.
Zacks Rank: Advanced Micro’s Zacks Rank #2 increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings surprise.
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 could consider the following stocks with a positive Earnings ESP and a favorable Zacks Rank:
Ethan Allen Interiors Inc. ETH, with an Earnings ESP of +9.30% and a Zacks Rank #1.
MicroStrategy Inc. MSTR, with an Earnings ESP of +3.46% and a Zacks Rank #1.
Ferrari N.V. RACE, with an Earnings ESP of +5.26% and a Zacks Rank #1.
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MICROSTRATEGY (MSTR): Free Stock Analysis Report
ADV MICRO DEV (AMD): Free Stock Analysis Report
ETHAN ALLEN INT (ETH): Free Stock Analysis Report
FERRARI NV (RACE): Free Stock Analysis Report
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