U.S. Markets closed

Will PMC-Sierra (PMCS) Disappoint This Earnings?

Zacks Equity Research

PMC-Sierra Inc. (PMCS) is set to report its third-quarter 2013 results on Oct 24. Last quarter, it posted a 50.0% positive surprise. Let’s see how things are shaping up for this announcement.

Growth Factors This Past Quarter

PMC-Sierra’s strength in the Optical and Mobile market segments led to higher sales growth rates in the second quarter of 2013. However, the company’s Storage segment was impacted by the continued sluggish enterprise spending. Gross margins expanded in the quarter, driven by higher revenues and a favorable product mix.

For the third quarter, PMC-Sierra expects to generate revenues in the range of $126–$134 million, up about 2% sequentially at the midpoint.

Earnings Whispers?

Our proven model does not conclusively show that PMC-Sierra will beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here as you will see below.

Zacks ESP:  Both the Most Accurate estimate and the Zacks Consensus Estimate stand at 7 cents. Hence, the difference is 0.00%.

Zacks Rank #3 (Hold): PMC-Sierra’s Zacks Rank #3 (Hold) when combined with a 0.0% ESP makes surprise prediction difficult.

We caution against stocks with a 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:

Melco Crown Entertainment Ltd (MPEL), with an Earnings ESP of +6.45% and a Zacks Rank #1 (Strong Buy).

Kemper Corp. (KMPR), with an Earnings ESP of +39.53% and a Zacks Rank #1 (Strong Buy).

SY Bancorp Inc. (SYBT), with an Earnings ESP of +4.08% and a Zacks Rank #1 (Strong Buy).

Read the Full Research Report on PMCS
Read the Full Research Report on KMPR
Read the Full Research Report on MPEL
Read the Full Research Report on SYBT

Zacks Investment Research