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Will Tessera (TSRA) Disappoint This Earnings Season?

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Tessera Technologies Inc is set to report third quarter 2013 results on Nov 6. Last quarter it posted a 7.41% negative surprise. Let’s see how things are shaping up for this announcement.

Growth Factors this Past Quarter

Tessera’s second-quarter 2013 net loss of 30 cents per share was wider than the Zacks Consensus Estimate of a loss of 27 cents.

Reported revenues of $46.6 million in the second quarter were up sequentially but down year over year and in line with the Zacks Consensus Estimate.

Tessera remains a company with good intellectual property, which it has protected with great difficulty. However, management is keen on shifting to a lower-margin but safer product-oriented model involving camera modules for mobile devices. The company is believed to be on the right track as this could reduce if not eliminate the significant litigation expenses it has been incurring. The fact that the target market is fast-growing is an added bonus. It is further believed that the broadening of its relationship with SK Hynix with new licensing agreements should help revenues in the future.

For the third quarter of 2013, Tessera expects revenues in the range of $35 million–$38 million. Intellectual Property revenues are expected in the range of $30–$33 million whereas Digital Optics revenues are expected to be $5 million. GAAP operating expense is expected between $59– $63 million with a tax rate of 30%.

Earnings Whispers?

Our proven model does not conclusively show that Tessera is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP:  That is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at a loss of 18 cents. Hence, the difference is 0.00%.

Zacks Rank #3 (Hold): Tessera’s Zacks #3 when combined with an ESP of 0.0% makes surprise prediction difficult. We caution against stocks with Zacks #4 and #5 Ranks (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 they have the right combination of elements to post an earnings beat this quarter:  

Melco Crown Ent with an Earnings ESP of +6.45% and a Zacks Rank # 1 (Strong Buy).

Akorn Inc (AKRX - Free Report) with an Earnings ESP of +7.69% and a Zacks Rank # 1 (Strong Buy).

Blucora Inc (BCOR - Free Report) with an Earnings ESP of +57.14% and a Zacks Rank # 1 (Strong Buy).

In-Depth Zacks Research for the Tickers Above

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