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KEMET (KEM) Q3 Earnings to Ride on Solid Capacitor Demand

Zacks Equity Research

KEMET Corporation KEM is set to report third-quarter fiscal 2019 results on Jan 31.

Notably, the company’s earnings beat the Zacks Consensus Estimate in the trailing four quarters, delivering average positive surprise of 30.6%. In the last reported quarter, the company’s adjusted earnings outpaced the Zacks Consensus Estimate by 26 cents.

Moreover, KEMET’s top line beat the consensus mark in all the trailing four quarters. In second-quarter fiscal 2019, revenues came in at $349 million, beating the Zacks Consensus Estimate of $336 million and increasing 15.9% from the year-ago quarter.

The Zacks Consensus Estimate for third-quarter revenues is currently pegged at $353.4 million, which indicates year-over-year growth of 15.3%. Moreover, the consensus mark for earnings has been steady at 93 cents over the past seven days.

Kemet Corporation Price and EPS Surprise

Kemet Corporation Price and EPS Surprise | Kemet Corporation Quote

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

Key Factors to Consider

KEMET’s third-quarter fiscal 2019 results are expected to benefit from robust market demand for capacitors and the company’s increased capacity to meet the demand.

KEMET, the largest manufacturer of Multilayer Ceramic Capacitors (MLCC), is also expected to benefit from lower supply of ceramic capacitors. Moreover, the exit of its Japanese counterparts from the “large case size market” may benefit the company. KEMET may also gain from growing shift of non-tantalum capacitors users to tantalum capacitors.

The company continues to have strong backlog in its business segments including MLCC and tantalum, which may drive revenues in the soon-to-be reported quarter. Notably, KEMET’s demand for its products is evident from a customer agreeing to offer $36 million interest-free loan to fund a capacity expansion.

The U.S. China trade war is expected to have negligible impact on KEMET as any products produced in China have limited exposure to the United States and outside of Chinese market. Moreover, the company’s margins in third-quarter fiscal 2019 are expected to benefit from a favorable product mix.

However, growth in Asia is expected to be slightly low due to the ongoing China U.S. trade tensions.

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) along with a positive Earnings ESP has a good chance of beating estimates. The Sell-rated stocks (Zacks Rank #4 or 5) are best avoided.

KEMET has a Zacks Rank #3 and an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks to Consider

Here are a few companies you may want to consider as our model shows that these have the right combination of elements to post earnings beat in their upcoming releases:

Twitter TWTR has an Earnings ESP of +13.03% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Sprint Corporation S has an Earnings ESP of +13.33% and a Zacks Rank #2.

Lumentum Holdings LITE has an Earnings ESP of +1.1% and a Zacks Rank #2.

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