With the current reporting cycle drawing to an end, overall earnings growth remains elusive. As more companies report their quarterly numbers, the predictions of this quarter being the fifth straight quarter of an earnings decline seems more pertinent. As per the recent Earnings Outlook, 414 out of the total S&P 500 companies’ earnings have declined by 4.5% on 1% lower revenues. Also, we expect earnings for the quarter to be down 3.1% from the same period last year on 0.4% lower revenues.
Additionally, third-quarter estimates are on a downward spiral too, with total Q3 earnings for the S&P 500 index are currently anticipated to be down 2.2% from the same period last year. However, we expect the effects of this downturn to subside in the fourth quarter and meaningful earnings growth to resume thereon.
Focus on Telecom Stocks:
The telecom industry – which comprises telecom operators and equipment manufacturers, is likely to witness reasonable growth through 2016. We believe that continuous advancement in technologies and adoption of newer business models are aiding this industry in improving its revenues.
We focus on four telecom stocks that are scheduled to report their second-quarter financial results on Aug 8.
NeoPhotonics Corporation (NPTN - Free Report) is engaged in the design and manufacture of photonic integrated circuit, or PIC, based modules and subsystems for bandwidth-intensive, high-speed communications networks. The company has a Zacks Rank #3 (Hold) and an Earnings ESP of 0.00%. This is because both Most Accurate estimate and the Zacks Consensus Estimate stand at 7 cents. According to our proven model, a company needs the right combination of two key ingredients – a positive Earnings ESP and a Zacks Rank #3 or better – to increase the odds of an earnings surprise. Thus, NeoPhotonics doesn’t conclusively show that it is likely to beat the Zacks Consensus Estimate this quarter.
Ceragon Networks Ltd. (CRNT - Free Report) is a leading provider of high-capacity wireless backhaul solutions for cellular and fixed wireless operators, enterprises and government organizations. The company has a combination of Zacks Rank #3 and an Earnings ESP of 0.00%. This is because both Most Accurate estimate and the Zacks Consensus Estimate are at breakeven. Although Zacks Rank #3 increases the predictive power of ESP, we need a positive Earnings ESP to be confident of an earnings beat and hence Ceragon Networks doesn’t conclusively show that it is likely to beat the Zacks Consensus Estimate this quarter.
RigNet, Inc. (RNET - Free Report) is engaged in providing data network infrastructure serving the remote communication needs of the oil and gas industry. RigNet has a combination of Zacks Rank #3 and an Earnings ESP of 0.00%. This is because both Most Accurate estimate and the Zacks Consensus Estimate stand at 9 cents. As stated above, we need a positive Earnings ESP to be confident of an earnings beat and hence RigNet doesn’t conclusively show that it is likely to beat the Zacks Consensus Estimate this quarter.
Parkervision Inc. (PRKR - Free Report) is a video and wireless technology service provider. This Zacks Rank #3 stock has an Earnings ESP of 0.00%. Such a combination is inadequate for an earnings beat this quarter.
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