We expect memory chip maker SanDisk Corp. to beat expectations when it reports second quarter 2013 results on Jul 17.
Why a Likely Positive Surprise?
Our proven model shows that SanDisk is likely to beat earnings because it has the right combination of two key ingredients.
Positive Zacks ESP: Expected Surprise Prediction or ESP (Read: Zacks Earnings ESP: A Better Method), which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is at +4.55%. This is very meaningful and a leading indicator of a likely positive earnings surprise for shares.
Zacks Rank #1 (Strong Buy): Note that stocks with Zacks Ranks of #1, #2 and #3 have a significantly higher chance of beating earnings. The sell rated stocks (#4 and #5) should never be considered going into an earnings announcement.
The combination of SanDisk’s Zacks Rank # 1 (Strong Buy) and +4.55% ESP makes us very confident in looking for a positive earnings beat on Jul 17.
What is Driving the Better Than Expected Earnings?
Improved supply/demand metrics for NAND and solid state drive (SSD), strength across OEM (original equipment manufacturer) and Retail channels and tailwinds from weak yen are expected to lead to a positive earnings surprise in the upcoming quarter.
The positive trend is evident from the trailing four-quarter average surprise of 22.9%. This was possible mainly due to solid recovery in the mobile embedded and retail businesses, strength across geographies and favorable supply/demand metrics.
Other Stocks to Consider
Apart from SanDisk, we also expect earnings beat from the following stocks.
Earthlink Inc. , Earnings ESP of +33.33% and Zacks Rank #1 (Strong Buy).
Rambus Inc. (RMBS - Free Report) , Earnings ESP of +9.09% and Zacks Rank #1 (Strong Buy).
Spreadtrum Communications Inc. , Earnings ESP of +9.68% and Zacks Rank #1 (Strong Buy).