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Analyst Blog

The third-quarter 2016 earnings season has commenced on a better note, with big banks reporting positive results. However, growth trends are still dreary particularly due to the weakness in the energy and technology sector.

As per the latest Earnings Trends report, overall third-quarter earnings for S&P 500 companies are expected to be down 2.2% from the year-ago quarter on revenues that are estimated to increase 1.5%.

Earnings for the Technology sector are anticipated to be down 1.7% based on 1.1% lower revenues. Apple’s guidance, which projects earnings decline of 20.6% on 9.6% lower revenues, will deal a major blow to earnings. Excluding Apple, earnings are estimated to grow 3%.

The current week (Oct 17-21) will see releases from more than 244 companies, out of which 80 companies are S&P 500 members.

Here is a sneak peek into four technology companies lined up to report earnings on Oct 18.

Linear Technology Corporation (LLTC - Free Report) has a well diversified business that caters to industrial, automotive and communications infrastructure. The company will soon be acquired by Analog Devices in a cash and stock deal worth $14.8 billion.

Linear is expected to beat first-quarter 2017 earnings as it has a favorable combination of Zacks Rank #3 (Hold) and an Earnings ESP of +1.85%.

This is because, as per our proven model, a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 to beat earnings. Simultaneously, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
 

LINEAR TEC CORP Price and EPS Surprise

 

LINEAR TEC CORP Price and EPS Surprise | LINEAR TEC CORP Quote

We also note that Linear’s results compared favorably with the Zacks Consensus Estimate in the last four quarters, with an average beat of 3.65%.

Intel Corporation (INTC - Free Report) is a dominant name in the semiconductor industry. The company’s growing focus into areas with better growth prospects, such as the artificial intelligence (AI) and Internet of Things (IoT) businesses are key catalysts. Moreover, improving PC market trends is a positive for the company

However, our proven model does not conclusively show that Intel is likely to beat third-quarter 2016 earnings, given the combination of a Zacks Rank #1 and Earnings ESP of 0.00%.
 

INTEL CORP Price and EPS Surprise

 

INTEL CORP Price and EPS Surprise | INTEL CORP Quote

However, we note that Intel results compared favorably with the Zacks Consensus Estimate in the last four quarters, with an average beat of 11.86%.

Manhattan Associates Inc. (MANH - Free Report) is a leading provider of technology-based solutions to improve supply chain effectiveness and efficiencies. We note that the company’s results compared favorably with the Zacks Consensus Estimate in the last four quarters, with an average beat of 9.90%.
 

MANHATTAN ASOC Price and EPS Surprise

 

MANHATTAN ASOC Price and EPS Surprise | MANHATTAN ASOC Quote

However, our proven model does not conclusively show that the company is likely to beat third-quarter 2016 earnings, given the combination of a Zacks Rank #3 and Earnings ESP of 0.00%.

Yahoo! Inc. (YHOO - Free Report) is unlikely to post a beat in its third-quarter fiscal 2016 results due to the unfavorable combination of a Zacks Rank #3 and Earnings ESP of 0.00%.

Yahoo! is in the process of selling its core assets to Verizon for $4.8 billion, a move that can be considered as CEO Marissa Mayer's final efforts to cure the company’s ailing fortunes. But the nightmare doesn’t seem to end for Yahoo as it continues to get embroiled in legal issues and its consequences.

Late admission of the massive 2014 cyber-attack is likely to affect the Verizon deal, especially after the disclosure triggered a number of notable incidents. Following the news, Yahoo was not only sued but also faced senators’ ire for the late confirmation. (Read More: What to Expect from Yahoo! (YHOO - Free Report) this Earnings Season?)
 

YAHOO! INC Price and EPS Surprise

 

YAHOO! INC Price and EPS Surprise | YAHOO! INC Quote

We also note that Yahoo!’s results compared unfavorably with the Zacks Consensus Estimate in the last four quarters, with an average miss of 50.72%.

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