Microsemi Corporation (MSCC) is set to report its second quarter 2013 results today after markets close. In the prior quarter, the company posted a 2% negative earnings surprise. Let’s see how things are shaping up for this announcement.
Growth Factors this Past Quarter
Microsemi reported a disappointing first quarter due to weakness in the communications, aerospace and industrial markets. Although Microsemi has benefited from growing electronic content in the defense & security space, lower Department of Defense (DoD) spending due to U.S. military budget constraints may impact its top line.
However, Microsemi’s gross margin improved due to growing sales of new higher-margin products and a reduction in operating costs due to headcount reduction. Management is also positive that demand in the communications market may improve and believes that key customers such as A&T will generate steady demand.
The Zacks Consensus Estimate for the second quarter stands at 30 cents while that for fiscal 2013 stands at $1.53.
Microsemi posted negative surprises in the first quarter of 2013 and second and fourth quarter of 2012. Its results were in line with the Zacks Consensus Estimate in the third quarter of 2012. This resulted in an average negative surprise of 3.29% for the preceding four quarters.
No estimate revisions were noticed for both the second quarter and fiscal 2013 over the past 30 days. As a result, the Zacks Consensus Estimate has remained unchanged for the second quarter as well as for 2013.
The chances of a big surprise are unlikely given the lack of catalysts during the quarter. The stock carries a Zacks Rank #3 (Hold).
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
Our model states that a stock needs to have both a positive Zacks Earnings ESP (Read: Zacks Earnings ESP: A Better Method) and a Zacks Rank #1, #2 or #3 to beat earnings estimates. You could, therefore, consider the following stocks as our model shows that they have the right combination of elements to post an earnings beat this quarter:
LinkedIn Corp.(LNKD), Earnings ESP of +300.0% and Zacks Rank #3 (Hold)
Intersil Corp.(ISIL), Earning ESP of +62.5% and Zacks Rank #3
Amazon.com(AMZN), Earnings ESP of +100.0% and Zacks Rank #3
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