We expect memory chip maker SanDisk Corp. (SNDK) to beat expectations when it reports first quarter 2013 results on Apr 17.
Why a Likely Positive Surprise?
Our proven model shows that SanDisk is likely to beat earnings because it has the right combination of two key ingredients.
Positive Zacks ESP: Earnings Surprise Prediction or ESP (Read: Zacks Earnings ESP: A Better Method), which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is at +9.09%. This is very meaningful and a leading indicator of a likely positive earnings surprise for shares.
Zacks Rank #1 (Strong Buy): Note that stocks with Zacks Ranks of #1, #2 and #3 have a significantly higher chance of beating earnings. The sell rated stocks (#4 and #5) should never be considered going into an earnings announcement.
The combination of SanDisk’s Zacks Rank # 1 (Strong Buy) and +9.09% ESP makes us very confident in looking for a positive earnings beat on Apr 17.
What is Driving the Better Than Expected Earnings?
Improved supply/demand ratio for solid state drive (SSD), strength across OEM (original equipment manufacturer) and Retail channels and tailwinds from a weak Yen are expected to lead to a positive earnings surprise in the upcoming quarter.
The positive trend is evident from the trailing four-quarter average surprise of 17.6%, which was greatly helped by the 45.6% surprise in the last-reported quarter. This was possible mainly due to solid recovery in the mobile embedded and retail businesses, strength across geographies and favorable supply/demand metrics.
Other Stocks to Consider
Apart from SanDisk, we also expect earnings beat from the following stocks.
Lattice Semiconductor Corp. (LSCC), Earnings ESP of +100.0% and Zacks Rank #1 (Strong Buy).
Micron Technology Inc. (MU), Earnings ESP of +200.0% and Zacks Rank #2 (Buy).
LinkedIn Corp. (LNKD), Earnings ESP of +300.0% and Zacks Rank #3 (Hold).
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