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Rambus (RMBS) to Report Q1 Earnings: What's in the Cards?

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Rambus Inc. (RMBS - Free Report) is set to report first-quarter 2016 results on Apr 18. Last quarter, the company posted a positive earnings surprise of 23.08%. Moreover, Rambus has outperformed the Zacks Consensus Estimate in three out of the four trailing quarters with an average positive earnings surprise of 25.9%.

Let’s see how things are shaping up for this announcement.

Factors at Play

Rambus designs, develops, licenses and markets high-speed chip-to-chip interface technology to enhance the performance and cost-effectiveness of computers, consumer electronics and other electronic systems.

With energy-efficient lighting, LED products being used in the latest architectural, retail, commercial and residential lighting fixtures, we believe Rambus is in a favorable position to capitalize on this opportunity. Also, in our opinion, the recent acquisition of Smart Card Software will enhance its product offerings, thereby boosting the top and bottom lines over the long run.

Meanwhile, Rambus is going through a restructuring phase and we expect it to yield favorable results in the first quarter and beyond. Additionally, licensing agreements — as the result of successful monetization of Rambus’ patents — remain a recurring revenue source and should boost results.

However, investments in the CryptoManager platform, and certain memory and interface technologies may impact Rambus’ margins in the to-be-reported quarter.

Earnings Whispers

Our proven model does not conclusively show that Rambus will beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen. But 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 9 cents. Hence, the difference is 0.00%.

Zacks Rank: Rambus’ Zacks Rank #3, when combined with a 0.00% ESP, makes surprise prediction difficult.

Note that we caution against stocks with a Zacks Rank #4 or #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.

Stocks to Consider

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

F5 Networks Inc. (FFIV - Free Report) , with an Earnings ESP of +1.58% and a Zacks Rank #2.

Level 3 Communications Inc. , with an Earnings ESP of +8.89% and a Zacks Rank #3.

Intel Corp. (INTC - Free Report) , with an Earnings ESP of +4.08% and a Zacks Rank #3.

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Intel Corporation (INTC) - free report >>