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Xilinx (XLNX) to Post Q3 Earnings: What's in the Offing?

Zacks Equity Research

Xilinx XLNX is set to report third-quarter fiscal 2020 results on Jan 28.

For third-quarter fiscal 2020, the company projects revenues of $710-$740 million.

The Zacks Consensus Estimate for revenues is pegged at $725.7 million, indicating a decline of 9.3% from the year-ago quarter’s reported figure. The consensus mark for earnings stands at 64 cents per share, implying a fall of 30.4% from the prior-year quarter’s reported number.

Xilinx, Inc. Price and EPS Surprise

Xilinx, Inc. Price and EPS Surprise

Xilinx, Inc. price-eps-surprise | Xilinx, Inc. Quote

The company’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters but missed the mark once, the average positive surprise being 2.9%.

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

Factors at Play

Xilinx’s third-quarter fiscal 2020 top line is likely to have been driven by significant contributions from storage and networking customers, including those from Solarflare. Notably, management expects the Solarflare buyout to contribute $10 million to the December quarter.

Growing demand for the company’s 60-nanometer UltraScale+ family is likely to have been a key driver. The company is also benefiting from strong demand for its Zynq platform, which is boosted by the adoption of the MPSoC family in wireless and across core vertical markets.

Moreover, datacenter revenues are likely to have grown in the quarter under review, backed by an expansion of the business at multiple hyperscalers. Also, the datacenter market is likely to have continued to be dynamic as customers are evaluating the use of FPGAs for computing network and storage acceleration, which is a positive.

However, the suspension of shipments to Huawei due to the export ban imposed by the U.S. government is likely to have dented the company’s revenues.

In the last quarter’s earnings call, management mentioned that the company forecasts the WWG business to be down significantly in the fiscal third quarter due to no revenue expectation from Huawei.

Management also expects fiscal third-quarter results to reflect unfavorable impact of the baseband ASIC transition and unexpected program delays with some communication customers.

Moreover, global trade uncertainty is likely to have led to a reduction in customer orders. A slower-than-expected customer ramp is also likely to have resulted in year-over-year flat revenues from core vertical markets in the third quarter.

What Our Model Says

The proven Zacks model does not conclusively predict an earnings beat for Xilinx this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of beating estimates. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Xilinx has a Zacks Rank #3 and an its Earnings ESP of 0.00%.

Stocks to Consider

Here are some stocks you may consider, as our model shows that these have the right combination of elements to beat on earnings in their upcoming releases:

Apple Inc. AAPL has an Earnings ESP of +4.08% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Palo Alto Networks PANW has an Earnings ESP of +1.18% and a Zacks Rank #3.

Check Point Software Technologies CHKP has an Earnings ESP of +0.90% and a Zacks Rank of 3.

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