We expect global semiconductor company NXP Semiconductors NV (NXPI Quick QuoteNXPI - Free Report) to beat expectations when it reports second-quarter 2016 results on Jul 27. Last quarter, the company recorded a positive earnings surprise of 2.41%. Notably, NXP Semiconductors has surpassed the Zacks Consensus Estimate thrice in the four preceding quarters with an average positive surprise of 0.92%.

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

Why a Likely Positive Surprise?

Our proven model shows that NXP Semiconductors is likely to beat earnings because it has the right combination of two key ingredients. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) to be able to beat estimates and NXP Semiconductors has the right mix.

Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +0.90%. This is very meaningful and a leading indicator of a likely positive earnings surprise for the company.

Zacks Rank: NXP Semiconductors carries a Zacks Rank #3. The combination of NXP Semiconductors’ Zacks Rank #3 and +0.90% ESP makes us reasonably confident of an earnings beat on Jul 27.

Sell-rated stocks (#4 or #5), on the other hand, should never be considered going into an earnings announcement, especially when the company is witnessing negative estimate revisions.

NXP SEMICONDUCT Price and EPS Surprise

NXP SEMICONDUCT Price and EPS Surprise | NXP SEMICONDUCT Quote

The stock closed at $84.40 last Friday. We expect an earnings beat in the second quarter to positively influence the company’s shares.

What’s Driving the Better-than-Expected Earnings?

NXP Semiconductors, a global semiconductor company known for its automotive and chip identification business, has seen massive growth in the portable device segment over the past year. This trend is expected to have continued in the second quarter as well.

Persistently strong adoption of tablets and smartphones, automotive electronics and the emergence of a new category of wearables boosted the demand for processing and sensing devices that run them. This should boost NXP Semiconductors’ second-quarter revenues as well.

With the acquisition of Freescale Semiconductor, NXP Semiconductors has now become the world’s leading provider of automotive semiconductor solutions and general purpose microcontroller products. We believe that this acquisition will begin providing accretion to the company’s second-quarter earnings.

Other Stocks to Consider

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

Open Text Corporation (OTEX Quick QuoteOTEX - Free Report) , with an Earnings ESP of +1.10% and a Zacks Rank #1.

Boyd Gaming Corporation (BYD Quick QuoteBYD - Free Report) , with an Earnings ESP of +3.33% and a Zacks Rank #2.

Demand Media Inc. , with an Earnings ESP of +18.61% and a Zacks Rank #3.

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