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Can Rambus (RMBS) Q2 Earnings: A Surprise in the Cards?
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Rambus Inc. (RMBS - Free Report) is set to report second-quarter 2016 results on Jul 18, 2016. Last quarter, the company posted a positive earnings surprise of 22.2%. Moreover, Rambus has outperformed the Zacks Consensus Estimate in three out of the four trailing quarters with an average positive earnings surprise of 13.6%.
Let’s see how things are shaping up for this announcement.
Factors at Play
Rambus reported modest first-quarter results with the bottom line beating the Zacks Consensus Estimate and the top line almost matching the same. Quarterly revenues and earnings however declined from the year-ago period.
Nonetheless, Rambus is poised well to capitalize on the rising popularity of energy-efficient lighting, LED products in the latest architectural, retail, commercial and residential lighting fixtures. The recent acquisition of Smart Card Software will enhance its product offerings, thereby boosting its top and bottom line performance over the long run, in our view.
Also, recently, Rambus inked a definitive agreement to buy certain serial link assets of Semtech Corporation’s Snowbush IP for about $32.5 million in cash plus "additional payments based upon specific new product sales through the end of 2022." With this strategic purchase, Rambus will be able to expand its portfolio to better serve its customers.
Rambus is going through a restructuring phase and we expect it to yield favourable results. Additionally, licensing agreements — the result of successful monetization of Rambus’ patents — remains a recurring revenue source.
However, competition from Semiconductor Manufacturing International Corp. (SMI - Free Report) and Advanced Micro Devices and customer concentration remain headwinds for the company.
Earnings Whispers
Our proven model does not conclusively show that Rambus will beat earnings 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. But that is not the case here, as you will see below.
Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at 10 cents. Hence, the difference is 0.00%.
Zacks Rank: Rambus’ Zacks Rank #3, when combined with a 0.00% ESP, makes surprise prediction difficult.
Note that we caution against stocks with a Zacks Rank #4 or #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.
Stocks to Consider
Here are some stocks that you may consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:
Alliance Data Systems Corporation , with an Earnings ESP of +0.30% and a Zacks Rank #2
Intel Corp. (INTC - Free Report) , with an Earnings ESP of +5.66% and a Zacks Rank #2
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
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Can Rambus (RMBS) Q2 Earnings: A Surprise in the Cards?
Rambus Inc. (RMBS - Free Report) is set to report second-quarter 2016 results on Jul 18, 2016. Last quarter, the company posted a positive earnings surprise of 22.2%. Moreover, Rambus has outperformed the Zacks Consensus Estimate in three out of the four trailing quarters with an average positive earnings surprise of 13.6%.
Let’s see how things are shaping up for this announcement.
Factors at Play
Rambus reported modest first-quarter results with the bottom line beating the Zacks Consensus Estimate and the top line almost matching the same. Quarterly revenues and earnings however declined from the year-ago period.
Nonetheless, Rambus is poised well to capitalize on the rising popularity of energy-efficient lighting, LED products in the latest architectural, retail, commercial and residential lighting fixtures. The recent acquisition of Smart Card Software will enhance its product offerings, thereby boosting its top and bottom line performance over the long run, in our view.
Also, recently, Rambus inked a definitive agreement to buy certain serial link assets of Semtech Corporation’s Snowbush IP for about $32.5 million in cash plus "additional payments based upon specific new product sales through the end of 2022." With this strategic purchase, Rambus will be able to expand its portfolio to better serve its customers.
Rambus is going through a restructuring phase and we expect it to yield favourable results. Additionally, licensing agreements — the result of successful monetization of Rambus’ patents — remains a recurring revenue source.
However, competition from Semiconductor Manufacturing International Corp. (SMI - Free Report) and Advanced Micro Devices and customer concentration remain headwinds for the company.
Earnings Whispers
Our proven model does not conclusively show that Rambus will beat earnings 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. But that is not the case here, as you will see below.
Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at 10 cents. Hence, the difference is 0.00%.
Zacks Rank: Rambus’ Zacks Rank #3, when combined with a 0.00% ESP, makes surprise prediction difficult.
Note that we caution against stocks with a Zacks Rank #4 or #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.
Stocks to Consider
Here are some stocks that you may consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:
Alliance Data Systems Corporation , with an Earnings ESP of +0.30% and a Zacks Rank #2
Intel Corp. (INTC - Free Report) , with an Earnings ESP of +5.66% and a Zacks Rank #2
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>