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Cypress Semiconductor (CY) Q4 Earnings: What to Expect?

Zacks Equity Research

Cypress Semiconductor Corporation CY is slated to release fourth-quarter 2018 results on Jan 31.

Notably, the company surpassed the Zacks Consensus Estimate in each of the trailing four quarters, with average positive surprise of 10.89%.

In the last reported quarter, the company’s earnings as well as revenues surpassed the Zacks Consensus Estimate, and also recorded year-over-year improvement on both counts.

For the fourth quarter, Cypress Semiconductor anticipates revenues in the range of $585-$615 million. The Zacks Consensus Estimate for revenues is pegged at $598.7 million.

Non-GAAP earnings for the quarter are anticipated in the range of 31-35 cents. The Zacks Consensus Estimate for the same is projected at 33 cents.

The company anticipates non-GAAP gross margin between 47% and 48%.

Let’s see how things are shaping up prior to this announcement.

 

Cypress Semiconductor Corporation Price and EPS Surprise

 

Cypress Semiconductor Corporation Price and EPS Surprise | Cypress Semiconductor Corporation Quote

Factors to Consider

Cypress Semiconductor’s strength in the industrial and automotive segment, along with expanding presence in the IoT market — driven by acquisitions, product launches and consistent execution — are boosting the top line.

Strong performance of the company’s wireless IoT business, which is primarily driven by robust Bluetooth Wi-Fi combo solution, is also a key driver. Further, growth in microcontroller business and strong demand for PSoC products are expected to remain tailwinds for the Microcontroller and Connectivity Division (MCD) business.

The company’s USB-C product continues to witness rapid penetration, which is quite evident from robust growth in the customer base. The Zacks Consensus Estimate for MCD revenues is currently pegged at $371 million.

Improving demand from industrial and internet infrastructure, especially 4.5G and 5G customers for its flash memory product, is likely to keep up the momentum in Memory Products Division (MPD). The Zacks Consensus Estimate for MPD revenues stands at $228 million.

However, intensifying competition in the semiconductor industry is a major concern as this might compel the company to lower prices, which will hurt profitability.

Also, Cypress Semiconductor is exposed to fluctuations in foreign currency rates as international revenues account for a significant portion of its total revenues. The company generates a significant portion of its sales internationally, and is also reliant upon international suppliers, manufacturing partners and distributors.

Therefore, while the company’s hedging strategies have proved effective thus far, Cypress Semiconductor remains susceptible to adverse U.S. and international economic and market conditions.

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. Zacks Rank #4 (Sell) or 5 (Strong Sell) stocks are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Cypress Semiconductor has an Earnings ESP of 0.00% and currently carries a Zacks Rank #4, which makes surprise prediction difficult.

Stocks That Warrant a Look

You may consider the following stocks with a positive Earnings ESP and a favorable Zacks Rank.

Twitter, Inc. TWTR has an Earnings ESP of +13.03% and a Zacks Rank #1.

Square, Inc. SQ has an Earnings ESP of +6.60% and holds a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Lumentum Holdings Inc. LITE has an Earnings ESP of +1.10% and a Zacks Rank #2.

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