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Can Altera (ALTR) Surprise This Earnings Season?

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Altera Corp (ALTR - Free Report) is set to report third-quarter 2013 results on Oct 22. Last quarter, the company posted in-line earnings. Let’s see how things are shaping up for this announcement.

Growth Factors This Past Quarter

Altera delivered mixed second-quarter 2013 results with earnings beating the Zacks Consensus Estimate but revenues missing the same. Overall, year-over-year performances were weak while sequential performances provided some hope. The year-over-year decline was primarily due to weakness in mainstream and matured products, almost all the end-markets (barring auto, industrial & military) and the Americas and Asia-Pacific regions.

However, Altera provided encouraging guidance, citing some turnaround in the end markets. Moreover, the company’s association with Intel (INTC - Free Report) is likely to be a competitive differentiator and boost its long-term growth fundamentals. Additionally, the company’s solid book-to-bill ratio and backlog position are encouraging.

Earnings Whispers?

Our proven model does not conclusively show that Altera will beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 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 34 cents. Hence, the difference is 0.00%.

Zacks Rank: Altera’s Zacks Rank #3 (Hold) when combined with a 0.00% ESP makes surprise prediction difficult.

We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Other Stocks to Consider

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

Fiserv, Inc. (FISV - Free Report) , with Earnings ESP of +1.99% and a Zacks Rank #1 (Strong Buy).

Plexus Corp. (PLXS - Free Report) , with Earnings ESP of +1.49% and a Zacks Rank #1 (Strong Buy).

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