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NVIDIA Corp. (NVDA - Analyst Report) is set to release fourth-quarter 2014 results on Feb 12. In the previous quarter, NVIDIA’s earnings per share matched the Zacks Consensus Estimate. Let’s see how things are shaping up for this announcement.

Factors to Consider this Past Quarter

Although NVIDIA reported in line results in the third quarter, year over year comparisons were dismal. NVIDIA reported a year-over-year decline in earnings primarily due to lower sales and higher-than-expected operating costs. Also, the year-over-year sales decline in both Tegra and GPU segments remained concerns.

During the quarter, NVIDIA launched the 192-core Tegra K1 mobile processor, powered by Keplar technology, which provides an enhanced gaming experience for users. With the launch of this CUDA-core Tegra K1, NVIDIA can maximize user experience by offering high performance computing (HPC) capabilities, which in turn will increase its customer base and help in garnering additional revenues.

We believe NVIDIA’s innovative product pipeline that consists of the recently introduced SHIELD and the upcoming mobile processor Logan Tegra 4 processors will boost top-line growth, going forward.

However, the continuous decline in PC sales is a cause of concern for the company’s GPU segment. Competition from the likes of Intel Corp. (INTC - Analyst Report) and QUALCOMM Inc. (QCOM - Analyst Report) and higher operating expenses are also expected to hurt profitability in the near term.

Earnings Whispers?

Our proven model does not conclusively show that NVIDIA is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP (Expected Surprise Prediction) 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: ESP for NVIDIA is 0.00%. This is because the Most Accurate estimate and the Zacks Consensus Estimate both stand at 18 cents.

Zacks Rank: NVIDIA’s Zacks Rank #3 (Hold) when combined with a 0.00% ESP makes surprise prediction difficult.

We caution against stocks with 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 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:

Zillow, Inc. (Z - Snapshot Report), Earnings ESP of +20.0% and a Zacks Rank #1 (Strong Buy)
 

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