Will Cypress Miss Earnings Estimates in 1Q?

Zacks

Cypress Semiconductor Corp (CY) is set to report first quarter 2013 results on Apr 18. Last quarter it posted a 75% positive surprise. Let’s see how things are shaping up for this announcement.

Growth Factors This Past Quarter

The company’s sales growth rates in the fourth quarter were down sequentially as well as year over year due to a seasonal slowdown. The company saw some progress around its bookings, which increased across all divisions, indicating that revenue would pick soon.

The fourth quarter was weak for Cypress in terms of margin growth. Unfavorable product mix, higher factory absorption charges, and lower utilization and inventory reserves related to the Ramtron acquisition impacted margins. Competitive pressures also forced Cypress to lower prices, aggravating the margin decline.

In the last quarter, the company restructured its business divisions to lower operating expenses and focus on its core initiatives. The company expects to pursue growth opportunities in the touch-enabled Chinese device market, thus increasing TrueTouch sales in 2013.

Earnings Whispers?

The Zacks Consensus Estimate for the first quarter stands at a loss of 8 cents while that for fiscal 2013 stands at earnings of 22 cents.

Cypress has missed estimates once in the last four quarters, while beating estimates thrice.

There have been no estimate revisions in the last 30, 60 and 90 days. As a result, the Zacks Consensus Estimate for the first quarter as well as for 2013 remained unchanged over the last 30 and 60 days. But the Zacks Consensus Estimate for fiscal 2013 moved up significantly over the last 90 days. The stock carries a Zacks Rank #2 (Buy).

We caution against stocks with Zacks Ranks #4 and #5 (Sell rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Other Stocks to Consider

Our model states that astock needs to have both a positive earnings ESP (Read: Zacks Earnings ESP: A Better Method) and a Zacks Rank #1, #2 or #3 to beat earnings estimates. You could, therefore, consider the following stocks instead: 

  • Sandisk Corp. (SNDK), with an ESP of +9.09% and a Zacks Rank #1 (Strong Buy)
  • Netflix Inc. (NFLX), Earnings ESP of +5.56% and Zacks Rank #2 (Buy)
  • Amazon.com (AMZN), Earnings ESP of +190.0% and Zacks Rank #3 (Hold)
Read the Full Research Report on CY

Read the Full Research Report on SNDK

Read the Full Research Report on AMZN

Read the Full Research Report on NFLX

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