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Will Microsemi (MSCC) Beat Earnings Estimates This Quarter?

Zacks Equity Research

Microsemi Corporation (MSCC) is set to report its third quarter 2013 results on Jul 25. In the prior quarter, the company posted a 7% positive earnings surprise. Let’s see how things are shaping up for this announcement.

Growth Factors this Past Quarter

Microsemi reported a disappointing second 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 impacted 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 AT&T will generate steady demand.

Earnings Whispers?

The Zacks Consensus Estimate for the third quarter stands at 38 cents per share while that for fiscal 2013 stands at $1.55.

Microsemi posted a positive surprise in the second quarter of 2013 and negative surprises in the first and fourth quarters of 2012. This led to an average positive surprise of 0.74% for the preceding four quarters.

No estimate revisions were noticed for both the third quarter and fiscal 2013 over the past 30 days. As a result, the Zacks Consensus Estimate has remained unchanged for both the periods.

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:

InvenSense Inc. (INVN), Earnings ESP of +8.33% and a Zacks Rank #2 (Buy).

Huron Consulting Group Inc. (HURN), Earnings ESP of +1.64% and a  Zacks Rank #2 (Buy).

Gartner Inc. (IT), Earnings ESP of +1.96% and a Zacks Rank #2 (Buy).

Read the Full Research Report on HURN

Read the Full Research Report on IT

Read the Full Research Report on MSCC

Read the Full Research Report on INVN

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