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Will Cirrus Logic (CRUS) Miss Earnings Estimates?

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Cirrus Logic Inc. (CRUS - Free Report) is set to report first-quarter fiscal 2015 results on Jul 23. Last quarter, the company posted a positive earnings surprise of 33.3%. Moreover, it is worth noting that Cirrus Logic has outperformed the Zacks Consensus Estimate in all the four preceding quarters with an average positive surprise of 28.5%.

Let us see how things are shaping up for this announcement.

Growth Factors this Past Quarter

We believe that the continued investments in the audio segment are expected to positively impact the company in the long run. Additionally, synergies from acquisitions and expansion in the LED market continue to drive growth.

Most recently, Cirrus Logic agreed to buy Wolfson Microelectronics plc for nearly $467.0 million. This acquisition provides Cirrus Logic the platform to build its audio signal processing components. We believe that the acquisition will help Cirrus Logic to serve a broad customer base in the mass storage, industrial and audio markets.

It is noteworthy that, Cirrus Logic is poised to benefit from Apple’s (AAPL - Free Report) recent agreements with China Mobile (CHL - Free Report) (the largest carrier in China), since Apple is its major customer. Cirrus Logic generates approximately 80.0% of its revenue from Apple. So there’s a good chance that Cirrus Logic will benefit similarly. Nonetheless, there is always a risk of losing an Apple design, which can impact the financial performance of the company.

Moreover, we remain cautious about the company as the current global economic downturn might affect its business potential, going forward. Also, the company faces competition from the likes of Texas Instruments Inc. and STMicroelectronics, which remains a headwind.

Earnings Whispers?

Our proven model does not conclusively show that Cirrus Logic 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 17 cents. Hence, the difference is 0.00%.

Zacks Rank: Cirrus Logic carries a Zacks Rank #4 (Sell). 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, which you may consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:

Western Digital Corp, (WDC - Free Report) has an Earnings ESP of +4.02% and holds a Zacks Rank #2 (Buy).

F5 Networks, Inc. (FFIV - Free Report) has an Earnings ESP of +3.81% and a Zacks Rank #2.

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