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Mellanox (MLNX) to Report Q2 Earnings: Is a Beat in Store?

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Mellanox Technologies, Ltd. (MLNX - Free Report) is set to report fiscal second-quarter 2018 results on Jul 17, 2018. The company beat the Zacks Consensus Estimate in the trailing four quarters, delivering an average positive surprise of 12.9%.

In the last reported quarter, the company's earnings per share of 98 cents topped the Zacks Consensus Estimate of 83 cents and also came ahead of the year-ago figure of 29 cents.

Revenues surged 32.8% year over year to $251 million and outpaced the Zacks Consensus Estimate of $244 million.

Revenues improved on a year-over-year basis primarily driven by strong customer adoption of Gigabit EDR solutions in machine learning, artificial intelligence, high-performance computing, database, storage and more. Further, robust demand for Mellanox’s InfiniBand solutions is a key catalyst.

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

Expect What?

The Zacks Consensus Estimate for the quarter to be reported is pegged at $1.08 per share, reflecting year-over-year increase of 145.5%. Further, the Zacks Consensus Estimate for revenues is pegged at $265.4 million, up roughly 25.2% from the year-ago quarter.

Factors Likely to Influence Q2 Results

Strong customer adoption of company’s Gigabit EDR solutions in machine learning, artificial intelligence, high-performance computing, database and storage are positives.

Further, InfiBand’s adoption aided the company in sustaining its leadership position in the high-performance interconnects space.

Mellanox had won a contract from a Chinese weather research institute for an undisclosed amount. Per the deal, the company has been selected for its EDR 100 gigabit InfiniBand solutions which will substitute the OmniPath network in the current data center infrastructure. Institute’s selection of Mellanox’s InfiniBand solution will reinforce its competitive position against Intel’s (INTC - Free Report) Omni-Path solution.

Apart from strong demand for Mellanox’s InfiniBand solutions, the company has won contracts from the likes of NetApp, the University of Toronto and NASA Ames Research Center, which reflects strong demand for its solutions.

The University of Toronto also selected the Mellanox InfiniBand solutions to accelerate its new leading supercomputer in Canada. Earlier, the NASA Ames Research Center selected the company’s EDR InfiniBand solutions along with HPE SGI 8600 liquid cooled platform to expand its “Electra” supercomputing cluster.

Additionally, Mellanox’s collaboration with Microsemi Corporation is also expected to fortify its footprint in the high performance computing market, going forward.

Further, Mellanox launched the Mellanox Hyper-scalable Enterprise Framework for enterprise and private cloud data centers. The company claims it to be industry’s first scalable, open framework. The new framework will enable the organizations to develop a 25G, 50G and 100G hyperscale Ethernet driven network. We believe the rich features will aid Mellanox expand market share.

These factors are likely to positively impact the to-be-reported quarter.

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What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. The Sell-rated stocks (Zacks Rank #4 or #5) are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Infosys has a Zacks Rank #1 and an Earnings ESP of +4.44%. Consequently, this combination makes us reasonably optimistic of an earnings beat.

Other Stocks With a Favorable Combination

Here are some companies, which, as per our model, also have the right combination of elements to post an earnings beat this quarter:

Workday, Inc. (WDAY - Free Report) has an Earnings ESP of +8.62% and a Zacks Rank #2.You can see the complete list of today’s Zacks #1 Rank stocks here.

NVIDIA Corporation (NVDA - Free Report) has an Earnings ESP of +0.48% and a Zacks Rank #3.

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