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Will Advanced Micro (AMD) Beat Earnings Estimates This Quarter?

Zacks Equity Research

Advanced Micro Devices, Inc. (AMD) is set to report second quarter 2013 results on Jul 18. Last quarter, it posted a 24% positive surprise. Let’s see how things are shaping up for this announcement.

Growth Factors this Past Quarter

AMD posted a loss of 13 cents per share, which was better Zacks Consensus Estimate 17 cents loss per share. The improvement was due to solid execution and cost control effort.

AMD’s revenues decreased 5.8% sequentially and 31.4% year over year to $1.09 billion. The sequential decline was due to a 9% decrease in the Computing Solutions segment, partially offset by a 3% increase in Graphics segment’s revenues.

Advanced Micro has been providing chips for game consoles to lower its dependence on the declining personal computer market. The newly-launched PlayStation 4 and Xbox One video game consoles will feature its processor.

AMD is diversifying its business into new embedded markets, including communication, industrial and gaming, among others. Further, AMD is targeting the tablet, hybrid and small-screen notebook segments with its Temash product family, built on its low-power Jaguar cores. This could be a potential growth driver for the company.

Earnings Whispers?

Our proven model does not conclusively show that Advanced Micro is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive earnings expected surprise prediction or ESP (Read: Zacks Earnings ESP: A Better Method) and a Zacks Rank #1, #2 or #3 for this to happen. That is not the case here as you will see below.

Negative Zacks ESP: The ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is -8.3%.

Zacks Rank #1 (Strong Buy): Advanced Micro’s Zacks Rank #1 when combined with a negative 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 you may want to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:  

SanDisk Corp. (SNDK), with an ESP of +4.55% and a Zacks Rank #1 (Strong Buy).

Syntel Inc. (SYNT), with an ESP of +3.81% and a Zacks Rank #1 (Strong Buy).

Scientific Games Corporation (SGMS), with an ESP of +100.0% and a Zacks Rank #2 (Buy).

Read the Full Research Report on SNDK

Read the Full Research Report on SGMS

Read the Full Research Report on AMD

Read the Full Research Report on SYNT

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