U.S. Markets closed

Will Rambus' 2Q Earnings Beat Est.?

Zacks Equity Research

We expect technology licensing company Rambus Inc. (RMBS) to beat expectations when it reports second quarter 2013 results on Jul 18.

Why a Likely Positive Surprise?

Our proven model shows that Rambus is likely to beat earnings because it has the right combination of two key ingredients.

Positive Zacks ESP: Expected Surprise Prediction or ESP (Read: Zacks Earnings ESP: A Better Method), which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is at +9.09%. This is very meaningful and a leading indicator of a likely positive earnings surprise for shares.

Zacks Rank #1 (Strong Buy): Note that stocks with Zacks Ranks of #1, #2 and #3 have a significantly higher chance of beating earnings. The sell rated stocks (#4 and #5) should never be considered going into an earnings announcement.

The combination of Rambus’ Zacks Rank # 1 (Strong Buy) and +9.09% ESP makes us very confident in looking for a positive earnings beat on Jul 18.

What is Driving the Better Than Expected Earnings?

We believe that Rambus has had a great quarter. Rambus has signed a two-way licensing agreement with European chip-making company STMicroelectronics. Both the companies will use each other’s patented technologies for excelling in their core areas. Apart from this, the deal puts an end to the decade-long legal battle between the two companies and also keeps the doors open for further collaborations.

Apart from STMicro, Rambus settled legal disputes with South Korean memory chip-making company SK Hynix and signed a patent licensing agreement.

Also, Rambus is adding features to its LED (light emitting diodes) portfolio and is on its way to capitalize on the growing popularity of energy-efficient lighting.

Rambus has surpassed estimates in the past four trailing quarters, which resulted in an average positive surprise of 176.85%.

Other Stocks to Consider

Apart from Rambus, we also expect earnings beat from the following stocks.

SanDisk Corp. (SNDK), Earnings ESP of +4.55% and Zacks Rank #1 (Strong Buy).

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

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

Read the Full Research Report on SNDK

Read the Full Research Report on RMBS

Read the Full Research Report on HURN

Read the Full Research Report on IT

Zacks Investment Research

More From Zacks.com