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Bear of the Day: Synaptics (SYNA)

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Synaptics (SYNA - Free Report) delivered quarterly earnings in early August of $3.87 per share, beating the Zacks Consensus Estimate of $3.69 per share. This compares to earnings of $2.18 per share a year ago. These figures are adjusted for non-recurring items.

This report represents an earnings surprise of 4.88%. A quarter ago, it was expected that this maker of touch-screen technology would post earnings of $3.55 per share when it actually produced earnings of $3.75, delivering a surprise of 5.63%.

Over the last four quarters, the company has surpassed consensus EPS estimates four times.

But the main driver of SYNA dropping to the cellar of the Zacks Rank is the fast drop in earnings estimates.

In the past few weeks, the consensus EPS projection had been cut nearly 10% from $13.59 to $12.25.

SYNA is a key player in touch-screen technology across mobile and other applications. So we want to be buyers of SYNA when the EPS estimates turn around. The Zacks Rank will let us know.

Reviewing the Details

Synaptics, which belongs to the Zacks Electronics - Semiconductors industry, posted revenues of $476.4 million for the quarter ended June 2022, surpassing the Zacks Consensus Estimate by 0.30%. This compares to year-ago revenues of $327.8 million. The company has topped consensus revenue estimates three times over the last four quarters.

The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call.

Synaptics shares have lost about 48.5% since the beginning of the year versus the S&P 500's decline of -12.8%.

What's Next for Synaptics?

While Synaptics has underperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock?

There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately.

Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions.


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