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Semtech (SMTC) to Report Q4 Earnings: Will it Disappoint?

Zacks Equity Research

Semtech Corporation SMTC is slated to report fourth-quarter 2016 results on Mar 8. Last quarter, the company reported in-line results.

In the last one year, shares of Semtech outperformed the Zacks categorized Semiconductor Analog & Mixed industry. While the industry gained 42.25%, the stock returned 58.58%.

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

Factors to Consider

Semtech’s third-quarter earnings matched the Zacks Consensus Estimate. However, revenues of $137.2 million were up 0.9% sequentially and 18.5% year over year. The upside was driven by strong demand for the company’s consumer and communication end markets, partially offset by weakness in the enterprise market.

Also, bookings increased 48% year over year and the book-to-bill ratio was above 1.

We believe that Semtech’s new design wins, product introductions and solid execution will boost revenues and margins in the near term. However, challenges to several key end markets could weigh on the company’s prospects.

For the upcoming fourth-quarter results, the company expects revenues in the range of $134 million to $142 million; GAAP earnings per share in the range of 13–17 cents and non-GAAP earnings in the range of 33–37 cents.

Earnings Whispers

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

Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate is pegged at 26 cents. Hence, the difference is 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Semtech has a Zacks Rank #3.

We caution against stocks with a Zacks Rank #4 (Sell) or 5 (Strong Sell) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Semtech Corporation Price and Consensus


Semtech Corporation Price and Consensus | Semtech Corporation Quote

Stocks to Consider

Here are some stocks, which you may want to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:

Envestnet, Inc. ENV with an Earnings ESP of +4.55% and a Zacks Rank #1.

Tailored Brands, Inc. TLRD with an Earnings ESP of +9.09% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Spectrum Pharmaceuticals, Inc. SPPI with an Earnings ESP of +15.38% and a Zacks Rank #3.

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