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Will Marvell (MRVL) Miss Earnings Estimates?

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Marvell Technology Group Ltd. (MRVL - Free Report) is set to report fourth-quarter fiscal 2014 results on Feb 20. Last quarter, the company posted a positive earnings surprise of 41.2%. Let us see how things are shaping up for this announcement.

Growth Factors This Past Quarter

Marvell delivered decent third-quarter results wherein both the top and bottom line came ahead of the Zacks Consensus Estimate. Revenue contributions from the end markets were in line with expectations. Also, continuous share buybacks were a positive. However, the company’s fourth-quarter revenue forecast was tepid due to seasonality.

The company expects mobile and wireless end markets to grow, driven by a ramp up in its unified 3G platform for mobile and advanced wireless connectivity solutions. Moreover, higher adoption Marvell’s LTE solutions in North America and China during fiscal 2015 would be a tailwind for the stock.

We remain positive on Marvell’s diverse revenue model and stable balance sheet. However, sluggish macroeconomic conditions coupled with higher material costs, European exposure and intensifying competition from the likes of Intel Corp (INTC - Free Report) and LSI Corp. (LSI - Free Report) are the near term headwinds.

Earnings Whispers?

Our proven model does not conclusively show that Marvell 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 18 cents. Hence, the difference is 0.00%.

Zacks Rank: Marvell’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 is another company you may want to consider as our model shows that it has the right combination of elements to post an earnings beat this quarter:

Westlake Chemical Corp. (WLK - Free Report) has an Earnings ESP of +4.51% and holds a Zacks Rank #1 (Strong Buy). Westlake Chemical will report fourth-quarter 2013 results on Feb 20, 2014.


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