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Analyst Blog

As of Nov 2, 364 S&P 500 members, representing 72.6% of the index’s total market capitalization, have already reported their third-quarter results.

While total earnings for these companies are up 1.6% on a year-over-year basis (72.3% of the companies beat EPS estimates), total revenue is up1.6% on a year-over-year basis (54.7% of the companies beat top-line estimates).

Notably, after five consecutive quarters of decline, earnings are finally back in the positive territory. However, with every passing day, positive surprises on the revenue front are becoming rarer to find.

As per our latest EarningsOutlook report, overall third-quarter earnings for S&P 500 companies are anticipated to be up 2.4% (compared to an earlier estimate of a rise of 2.1%) from the year-ago quarter on revenues that are estimated to increase 1.4%.

Growth is expected to be driven by solid results from the finance sector. However, finance’s impressive show is anticipated to be mitigated by sluggish growth from the energy, autos, transportation and technology sectors.

Coming to the technology sector, 74% of the index members have reported their quarterly results with total earnings increasing 1% on 1.4% higher revenues. Notably, 84.2% of the companies have surpassed earnings per share estimates, while 71.1% have beaten revenue estimates. 

However, technology earnings growth is expected to remain muted due to disappointing results from Apple (AAPL - Free Report) . Although the iPhone maker beat fourth-quarter 2016 earnings estimates by a penny, its earnings declined 15% on a year-over-year basis on 9.9% decline in revenues.

Semiconductors comprise an important component of the technology sector and are anticipated to remain on the earnings growth trajectory in the quarter.

Here we take a look at four semiconductor companies that are set to report earnings on Nov 7:

Microchip Technology Inc. (MCHP - Free Report) is unlikely to beat second-quarter fiscal 2017 earnings estimates as it has an unfavorable combination of a Zacks Rank #3 (Hold) and an Earnings ESP of 0.00%. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.

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. We caution against stocks with a Zacks Rank #4 (Sell) or 5 (Strong Sell) going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Microchip Technology develops and manufactures specialized semiconductor products used by its customers for a wide variety of embedded control applications.

During the quarter, the company released the industry’s first end-to-end security solution for Internet of Things (IoT) devices that are compatible with Amazon Web Services. The company also rolled out its MOST50 networking devices for infotainment devices and introduced a new development board specifically meant for carrying out designing tasks on both 16-bit and 32-bit microcontrollers.

While these developments augur well for the company, an uncertain macroeconomic environment, foreign currency risk, and competition can adversely affect its earnings in the to-be reported quarter. 

MICROCHIP TECH Price and EPS Surprise

MICROCHIP TECH Price and EPS Surprise | MICROCHIP TECH Quote

We note that Microchip Technology’s results compared favorably with the Zacks Consensus Estimate in three out of the last four quarters, resulting in an average positive surprise of 5.32%.

ON Semiconductor Corp. (ON - Free Report) too is unlikely to beat third-quarter 2016 earnings estimates as it has an unfavorable combination of an Earnings ESP of 0.00% and a Zacks Rank #2.

ON Semiconductor is a supplier of broadband and power management integrated circuits and standard semiconductors used in numerous advanced devices. Its products range from high-speed fiber optic networking equipment to precise power management functions found in portable electronics.

Notably, ON Semiconductor acquired Fairchild Semiconductor for $2.4 billion of cash in September, which is likely to bolster the company’s product line of power management and analog semiconductor solutions. The company introduced many new products during the quarter such as the next generation fan motor driver for facilitating simplicity in appliance design, low-light industrial imaging solutions and an intelligent charge controller chip for power banks among others which place the company in good stead.

However, a significant debt burden and fierce competition in the semiconductor space remain concerns ahead of the third quarter earnings release.

ON SEMICON CORP Price and EPS Surprise

ON SEMICON CORP Price and EPS Surprise | ON SEMICON CORP Quote

Notably, ON Semiconductor’s results have beaten the Zacks Consensus Estimate in two of the preceding four quarters with an average positive surprise of 4.58%.

Similarly, MaxLinear, Inc. (MXL - Free Report) is also unlikely to beat third-quarter 2016 earnings estimates as it has an unfavorable combination of a Zacks Rank #2 and an Earnings ESP of 0.00%.

MaxLinear is a provider of radio-frequency analog and mixed signal semiconductor SoC solutions for broadband communication applications offering small silicon die-size, and low power consumption.

During the last quarter, the company achieved the 1 million milestone for shipments of digital satellite outdoor units to Microelectronics Technology. The company also jointly developed a set-top box reference design along with MStar Semiconductor for ultra-high definition satellite broadcast TV.

While these developments augur well for the company, foreign currency risk and interest rate risk remain concerns.

MAXLINEAR INC-A Price and EPS Surprise

MAXLINEAR INC-A Price and EPS Surprise | MAXLINEAR INC-A Quote

Notably, MaxLinear‘s results have beaten the Zacks Consensus Estimate in three out of the preceding four quarters with an average positive surprise of 5.32%.

On the other hand, the odds are in favor of Vishay Intertechnology Inc. (VSH - Free Report) . It is expected to beat third-quarter 2016 earnings estimates as it has a favorable combination of an Earnings ESP of +4.00% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Vishay is a leading international manufacturer and supplier of discrete passive electronic components and discrete active electronic components, particularly resistors, capacitors, inductors, diodes and transistors.

Notably, during the last quarter, Vishay introduced the 4-line diode that enables extreme size reduction for portable electronics. Additionally, the company ramped up its optoelectronics portfolio with the introduction of two new product lines of miniature infrared receiver modules, which have applications in remote controls of consumer appliances.

VISHAY INTERTEC Price and EPS Surprise

VISHAY INTERTEC Price and EPS Surprise | VISHAY INTERTEC Quote

Vishay‘s results have beaten the Zacks Consensus Estimate in two out of the preceding four quarters with an average positive surprise of 5.66%.

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