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Will Cypress (CY) Beat Earnings Estimates This Quarter?

Zacks Equity Research

Cypress Semiconductor Corp (CY) is set to report second quarter 2013 results on Jul 18. Last quarter, it posted a 38.0% positive surprise. Let’s see how things are shaping up for this announcement.

Growth Factors this Past Quarter

Though the company’s revenues were down both sequentially and year over year, it was above the management guided range of $163.0–$170.0 million. This can be attributed to higher demand in all except the Programmable Systems Division segment.

The first quarter was weak for Cypress in terms of margin growth. Unfavorable product mix, higher factory absorption charges and inventory reserves related to the Ramtron acquisition impacted margins. Competitive pressures also forced Cypress to lower prices, thus aggravating the margin decline.

Cypress provided a tepid outlook for the second quarter, with revenues forecast to increase in the range of $178 million to $186 million (up 3% to 8%). Cypress expects non-GAAP earnings per sharein the range of 6–8 cents, above the Zacks Consensus Estimate of $0.00.

Earnings Whispers?

Our proven model does not conclusively show that Cypress is likely to beat earnings this quarter. That 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.

Zacks ESP:  The earnings ESP for the stock is 0.00%.

Zacks Rank #2 (Buy): Cypress’ Zacks Rank #2 (Buy) 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 you may want to consider as our model shows 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 CY

Read the Full Research Report on SNDK

Read the Full Research Report on SGMS

Read the Full Research Report on SYNT

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