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The Zacks Analyst Blog Highlights: Yahoo, SanDisk, Syntel, InvenSense and KLA-Tencor

Zacks Equity Research

For Immediate Release

Chicago, IL – July 24, 2013 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Yahoo! Inc. (YHOO-Free Report), SanDisk (SNDK-Free Report), Syntel Inc. (SYNT-Free Report), InvenSense Inc. (INVN-Free Report) and KLA-Tencor Corporation (KLAC-Free Report).

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

Here are highlights from Tuesday’s Analyst Blog:

Yahoo! To Repurchase 40M Shares

Yahoo! Inc. (YHOO-Free Report) announced that it will repurchase 40 million shares of its common stock held by hedge fund Third Point for $29.11 per share. Third Point was Yahoo’s largest investor, so the news sent Yahoo! shares down 4.29%.

The company stated that the transaction will be funded primarily with cash and will be accretive to earnings per share (EPS). The company now has less than $700 million available under the existing $5 billion buyback plan announced last year.

The transaction will leave Third Point LLC fund with about 20 million shares, giving the company less than 2% ownership in Yahoo. All three directors nominated by Third Point -- Daniel S. Loeb, Harry J. Wilson and Michael J. Wolf will resign from Yahoo's board on Jul 31.

In 2012, Daniel Loeb, through his Third Point LLC fund, had amassed millions of Yahoo shares as he tried to influence the company's operations more effectively. Loeb had revealed that Yahoo's former chief executive Scott Thompson's academic credentials were inflated, which led to Thompson's departure in May 2012.

Very soon Loeb was added to the company's board of directors, and two months later Marissa Mayer was announced as the new chief executive officer of the company. Mayer had been focusing on the Internet company’s strong franchises, including e-mail, finance and sports.

Recently, Mayer stated that Yahoo is intent on getting the right people on board, which would result in properly focused products, leading to stronger traffic, and thereby revenues. Her leadership has proved beneficial for Yahoo, as evident from the share price increase of 76.78% in last year.

Now, at a point where Yahoo is making money, Loeb’s decision to cash his profit and depart might be a matter of concern for investors and the reason for the slight decline in share price. However, we remain confident about Mayer’s strategy and believe that the company is headed in the right direction. Also the company’s second-quarter non-GAAP earnings exceeded the Zacks Consensus Estimate driven by Yahoo’s equity holdings in Alibaba and Yahoo Japan.

Yahoo shares currently have a Zacks Rank #2 (Buy). Other stocks that are performing well at current levels include SanDisk (SNDK-Free Report), Syntel Inc. (SYNT-Free Report), and InvenSense Inc. (INVN-Free Report), all carrying a Zacks Rank #1 (Strong Buy).

Will KLA-Tencor (KLAC) Beat Earnings?

We expect semiconductor company KLA-Tencor Corporation (KLAC-Free Report) to beat expectations when it reports third quarter 2013 results on Jul 25.

Why a Likely Positive Surprise?

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

Positive Zacks ESP: The 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 +2.53%. This is very meaningful and a leading indicator of a likely positive earnings surprise for shares.

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

The combination of KLA’s Zacks Rank #2 (Buy) and an ESP +2.53% makes us reasonably confident in looking for a positive earnings beat on Jul 25.

What is Driving the Better than Expected Earnings?

KLA’s new products, process node transition and strong demand for smartphones and mobile computing devices will likely drive capex spending and growth in the second half of the year.

Also, according to a recent report from Gartner, worldwide wafer fab equipment (:WFE) spending will return to growth in 2013 with WFE spending projected to surpass $35.4 billion, a 7.4% increase from $33 billion in 2012. This is a big positive for the company.

The positive trend is seen in the trailing four-quarter average surprise of 9.84%.

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

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