Will Microsemi (MSCC) Surprise Earnings Estimates in Q3? - Analyst Blog
Microsemi Corporation MSCC is slated to report third-quarter fiscal 2015 results on Jul 23. Last quarter, the company posted a 1.82% positive earnings surprise. Let’s see how things are shaping up for this announcement.
Factors to Consider
Microsemi is an original equipment manufacturer of a broad range of high-reliability and analog/mixed signal integrated circuits. The company’s second-quarter adjusted earnings of 56 cents per share beat the Zacks Consensus Estimate by a penny backed by solid expense management.
Microsemi’s focus on security and increasing electronic content per device and expanding customer base will boost market share. The company continues to consolidate select facilities to cut costs over the long term. Moreover, the company’s defense business is expected to do well on the back by improved defense end-market environment. These factors should boost third-quarter results.
However, management will continue to invest in FPGAs and mixed signal RF product offerings, which might increase expenses, in turn impacting operating margins in the to-be-reported quarter.
Microsemi expects third-quarter revenues to be $302 million (+/- 2%) sequentially. Non-GAAP gross margin are expected in the range of 56.4–57.1%, while earnings are expected to range within 67–71 cents.
Earnings Whispers
Our proven model does not conclusively show that Microsemi will beat earnings this quarter as it does not have the right combination of two key ingredients. 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 57 cents. Hence, the difference is 0.00%.
Zacks Rank: Microsemi’s Zacks Rank #3 when combined with 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.
Stocks that Warrant a Look
Here are some companies you may want to consider as our model shows these have the right combination of elements to post an earnings beat:
FTI Consulting, Inc. FCN, with an Earnings ESP of +2.17% and a Zacks Rank #1.
ITT Corporation ITT, with an Earnings ESP of +3.39% and a Zacks Rank #1.
Gruma S.A.B. de CV GMK, with an Earnings ESP of +8.00% and a Zacks Rank #1.
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