Linear Technology Corporation (LLTC) is set to report fourth-quarter fiscal 2014 results on Jul 22. Last quarter, it posted an 8.7% positive surprise. Let’s see how things are shaping up for this announcement.
Growth Factors This Past Quarter
Linear posted decent third quarter results with both the bottom and top lines surpassing the Zacks Consensus Estimate. The sequential revenue increase of 4.0% was attributable to stronger sales across automotive, industrial and communications markets. Moreover, the book-to-bill ratio was positive in the quarter and bookings increased sequentially in all major markets, especially automotive, industrial and communications.
Linear’s business is well-diversified among core markets, such as industrial, automotive and communications infrastructure. Increasing demand from the automotive industry indicate stronger revenues in the upcoming quarter.
Although its computing business has been hit by weakness in the PC and notebook markets, management expects improved bookings momentum in all the end markets in the fourth quarter. The company also expects revenues to increase 2% to 6% sequentially.
Our proven model does not conclusively show that Linear Technology will beat estimates this quarter. That 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.
Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at 51 cents. Hence, the difference is 0.00%.
Zacks Rank: Linear Technology’s Zacks Rank #3 (Hold), when combined with a 0.00% ESP makes surprise prediction difficult.
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
Here are some other companies, which you may want to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:
Charter Communications, Inc. (CHTR), with Earnings ESP of +387.50% and a Zacks Rank #1 (Strong Buy).
NVIDIA Corporation (NVDA), with Earnings ESP of +31.58% and a Zacks Rank #1.
CommScope Holding Company, Inc. (COMM), with Earnings ESP of +4.84% and a Zacks Rank #1.