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Linear Technology (LLTC) Q2 Earnings: What's in the Cards?

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Linear Technology is set to report second-quarter fiscal 2017 results on Jan 17. Last quarter, the leading OEM of analog and mixed signal semiconductors posted a negative earnings surprise of 1.85%.

Over the past one year, shares of Linear Technologyhave been steadily treading higher. The stock has returned 60.13% compared with the Zacks Semi-General industry’s gain of 51.49%.

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

Factors to Consider

Linear’s first-quarter fiscal 2017 earnings of 53 cents missed the Zacks Consensus Estimate by a penny.

Revenues of $373.9 million came in below expectations but were up 9.4% year over year and flat sequentially. Margins remained strong, increasing 90 bps from the year-ago quarter.

Linear’s business is well diversified among core markets, such as industrial, automotive and communications infrastructure. It will soon be acquired by Analog Devices in a cash and stock deal worth $14.8 billion. In the last reported quarter, Linear’s stockholders approved the merger agreement and now the deal is expected to be completed by the end of the first half of calendar year 2017. The acquisition is expected to be accretive to non-GAAP earnings and cash flow going forward.

However, weakness in PC and notebook markets could hit the computing business and dampen the upcoming results.

Earnings Whispers

Our proven model does not show that Linear will beat on earnings this fiscal 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. That is not the case here as you will see below.

Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 54 cents. Hence, the difference is 0.00%. You can uncover the best stocks to buy or sell before they’re reported with ourEarnings ESP Filter.

Zacks Rank: Linear has a Zacks Rank #3 which increases the predictive power of ESP. Then again, a positive ESP is a prerequisite when it comes to predicting an earnings beat.

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.

Stocks to Consider

You could consider the following stocks with a positive Earnings ESP and a favorable Zacks Rank:

Hancock Holding Company , with an Earnings ESP of +1.64% and Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Morgan Stanley (MS - Free Report) , with an Earnings ESP of +1.54% and Zacks Rank #1.

United Continental Holdings, Inc. (UAL - Free Report) , with an Earnings ESP of +6.67% and a Zacks Rank #2.

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