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The technology sector is poised to hog the spotlight as we head into the busiest week of the Q2 earnings cycle. Major semiconductor companies are scheduled to report earnings this week.

According to the latest Earnings Outlook, 97 S&P 500 members or 28.1% of the index’s total membership have reported their quarterly results as of Jul 21. Of these, approximately 78.4% of the companies posted positive earnings surprises, while 72.2% beat top-line expectations. Earnings of these companies grew 8.4% from the comparable period last year, while revenues increased 5.1%.

The trend this earnings season indicates that we will finally see back-to-back four quarters of earnings growth after five straight quarters of decline. The report projects that earnings for the S&P 500 index will improve 8.6% from the year-ago period, while total revenue will be up 4.7%.

Technology Stocks Continue to Outperform

Technology is one of the three sectors contributing significantly to second-quarter earnings. The other two are Finance and Energy. Various technology giants, including Facebook (FB - Free Report) and Amazon (AMZN - Free Report) , are scheduled to report quarterly numbers this week.

We note that the technology sector has been a strong performer on a year-to-date basis. The sector is benefiting from increasing demand for cloud-based platforms, growing adoption of Artificial Intelligence (AI) solutions, Augmented/Virtual reality devices, autonomous cars, advanced driver assisted systems (ADAS) and Internet of Things (IoT) related software.

Per the report, total earnings are expected to be up 14.8% on 6.1% higher revenues for the second quarter.

A few semiconductor companies are slated to report second-quarter 2017 earnings on Jul 26. The industry serves as a driver, enabler and indicator of technological progress. So, let’s take a sneak peek into how Xilinx, Inc. (XLNX - Free Report) , Monolithic Power Systems, Inc. (MPWR - Free Report) , Silicon Laboratories, Inc. (SLAB - Free Report) and Mellanox Technologies, Ltd. (MLNX - Free Report) are placed ahead of their releases.

Xilinx Inc. is unlikely to beat first-quarter fiscal 2018 expectations as it has an unfavorable combination of a Zacks Rank #2 (Buy) and an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

This is because, as per our proven model, a company needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 or at least 3 (Hold) to deliver an earnings surprise. You can see the complete list of today’s Zacks #1 Rank stocks here.

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

The Zacks Consensus Estimate for the quarter is pegged at 60 cents. Last quarter, the company posted a positive earnings surprise of 5.6%. Notably, Xilinx outperformed the Zacks Consensus Estimate over all the trailing four quarters, with an average positive surprise of 8.9%. Shares of Xilinx have gained 6.5% year to date, significantly underperforming the S&P 500’s 10.6% rally.

Monolithic Power Systems is also not likely to beat second-quarter 2017 expectations as it has an Earnings ESP of 0.00% and a Zacks Rank #3. The Zacks Consensus Estimate for the quarter is pegged at 37 cents. Last quarter, the company posted a positive earnings surprise of 21.4%. Notably, Monolithic Power Systems has outperformed the Zacks Consensus Estimate twice for as many misses, in the trailing four quarters. It has an average positive surprise of 3.8%. Monolithic Power Systems stock has gained 28% year to date, substantially outperforming the 15.1% rally of the industry it belongs to.

Similarly, Silicon Laboratories is unlikely to surpass the second-quarter 2017 expectations as it has an Earnings ESP of 0.00% and a Zacks Rank #3. The Zacks Consensus Estimate for the quarter is pegged at 50 cents. Last quarter, the company posted a positive earnings surprise of 15%. Notably, Silicon Laboratories outperformed the Zacks Consensus Estimate in all the trailing four quarters, generating an average positive surprise of 30.6%.Shares of Silicon Laboratories have gained 8.1% year to date, significantly underperforming the industry’s 15.1% rally.

Even Mellanox Technologies, Ltd. seems very unlikely to beat second-quarter 2017 expectations. The stock has a Zacks Rank #3 and 0.00% Earnings ESP. The Zacks Consensus Estimate for the quarter is pegged at 11 cents. Last quarter, the company posted a negative earnings surprise of 100%. Notably, Mellanox Technologies underperformed the Zacks Consensus Estimate over all the trailing four quarters, witnessing an average negative surprise of approximately 30%.Shares of Mellanox Technologies have gained 9.9% year to date, significantly underperforming the industry’s 30.4% rally.

More Stock News: Tech Opportunity Worth $386 Billion in 2017

From driverless cars to artificial intelligence, we've seen an unsurpassed growth of high-tech products in recent months. Yesterday's science-fiction is becoming today's reality. Despite all the innovation, there is a single component no tech company can survive without. Demand for this critical device will reach $387 billion this year alone, and it's likely to grow even faster in the future.

Zacks has released a brand-new Special Report to help you take advantage of this exciting investment opportunity.  Most importantly, it reveals 4 stocks with massive profit potential. See these stocks now>>



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