Will PMC-Sierra (PMCS) Disappoint This Earnings?


PMC-Sierra Inc. (PMCS) is set to report fourth-quarter 2013 results on Jan 30. Last quarter, it posted a 14.3% negative surprise. Let’s see how things are shaping up for this announcement.

Growth Factors this Past Quarter

PMC-Sierra’s third-quarter earnings missed the Zacks Consensus Estimate by a penny due to challenging macro environment and slower-than-expected carrier spending, partially offset by solid expense management. However, revenues were up sequentially due to strength in the Storage and Mobile market segments, partially offset by weakness in the Optical segment.

Gross margins expanded in the quarter, driven by higher revenues and a favorable product mix.

For the fourth quarter, PMC-Sierra expects revenues to be flat to down 8% or down 4% at the mid-point. Additionally, the carrier business is expected to be down slightly, due to slower-than-expected carrier spending.

Earnings Whispers?

Our proven model does not conclusively show that PMC-Sierra will beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here as you will see below.

Zacks ESP:  Both the Most Accurate estimate and the Zacks Consensus Estimate stand at 5 cents. Hence, the difference is 0.00%.

Zacks Rank #3 (Hold): PMC-Sierra’s Zacks Rank when combined with a 0.00% ESP makes surprise prediction difficult.

We caution against stocks with a 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 you may want to consider as our model shows they have the right combination of elements to post an earnings beat:

Melco Crown Entertainment Limited (MPEL), with Earnings ESP of +2.50% and a Zacks Rank #1 (Strong Buy).

Waddell & Reed Financial, Inc. (WDR), with Earnings ESP of +2.44% and a Zacks Rank #1.

TransDigm Group Incorporated (TDG), with Earnings ESP of +6.25% and a Zacks Rank #1.

Read the Full Research Report on PMCS
Read the Full Research Report on WDR
Read the Full Research Report on TDG
Read the Full Research Report on MPEL

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