Lam Research Corporation (LRCX Quick QuoteLRCX - Free Report) , a leading provider of semiconductor manufacturing systems, is set to report fourth quarter fiscal 2016 results on Jul 27. Last quarter, it posted a 7.27% positive surprise.

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

Factors to Consider

Fiscal 2016 has been pretty good for the company given notable success in the areas of device architecture, process flow and technology inflections.

Last quarter, Lam delivered revenues and shipments above the midpoint of the guided range. Gross margin, operating income and non-GAAP EPS were above the high-end of the guidance range. Earnings outperformed our expectations while revenues missed.

Lam Research has high hopes from KLA-Tencor Corporation, which it acquired recently. Management expects that the combined company, which broadens the addressable market and expands its range of offerings, will contribute significantly toward sustainable growth, generating cash and creating value.

In 2016, the company saw increased adoption rates of 3D NAND technology, FinFETs and multi-patterning. It is likely to continue as the market leader in dielectric etch as Flex F and G Series dielectrics have been extremely successful products thus far. The company anticipates strong demand for leading-edge silicon in the enterprise market, driven by the long-term move to the cloud, storage and computing applications.

The company believes that its strong position, combined with its commitment to customers and value-enhancing collaborations will help drive performance over the next several years.

However, concerns persist in the form of volatility and lower growth expectations globally, with slow but steady improvement in some developed markets balancing the weakness in certain emerging economies.

On a non-GAAP basis, the company expects fourth quarter revenues of approximately $1.525 billion (+/- $75 million). Shipments are projected to be roughly $1.575 billion (+/- $75 million). Gross margin is predicted to be around 46.0% (+/-1%), while operating margin is likely to be about 22.0% (+/-1%). Earnings per share are projected to be $1.63 (+/- 10 cents) on a share count of nearly 173 million.

Earnings Whispers

Our proven model does not conclusively show that Lam Research is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. 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 $1.64. Hence, the difference is 0.00%.

Zacks Rank: Lam Research’s Zacks Rank #3 when combined with a 0.00% ESP makes surprise prediction difficult.

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 negative estimate revisions.

Stocks to Consider

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

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

Silicon Motion Technology Corp. (SIMO Quick QuoteSIMO - Free Report) with an Earnings ESP of +18.84% and Zacks Rank #1.

Charter Communications, Inc. (CHTR Quick QuoteCHTR - Free Report) with an Earnings ESP of +404.76% and a Zacks Rank #3.

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