SMART Global Holdings (SGH - Free Report) is scheduled to report fourth-quarter fiscal 2018 results on Oct 4.
The company surpassed the Zacks Consensus Estimate in all the trailing four quarters, with an average positive surprise of 17.90%.
We expect the company to perform well driven by strength in specialty memory business and growing market share in Brazil.
Shares of SMART Global have gained 2.4% in the past 12 months, underperforming the industry's 13.2% rally.
Expectations From Specialty Memory
This segment generated net sales of $102.7 million in the last reported quarter, up 5.1% from the year-ago quarter. The newer nonvolatile NVDIMM solutions use flash arrays within servers and storage equipment, thereby increasing the demand for the company’s flash and DRAM solutions.
Therefore, we expect Specialty Memory business to continue delivering strong numbers in the to-be-reported quarter.
Growing Brazil business to Aid Results
Brazil Mobile Memory generated net sales of $161.6 million in the third quarter, up 126.9% from the year-ago quarter.
Recently, the company partnered to create a new business unit in Brazil to focus on batteries for smart phones. It also aims to explore other areas in Brazil including communications devices such as Wi-Fi Bluetooth modules and other products for supporting the IoT market. This segment is also expected to perform well in the to-be-reported quarter, provided the business remains strong.
Penguin Computing Buyout Aids Growth
The recent buyout of computing and server solutions maker, Penguin Computing, expands the company’s offerings in both specialty compute and storage solutions. The deal diversifies SMART Global’s reach into new and growing markets such as Artificial intelligence and Machine Learning, thereby expanding its top line.
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. Sell-rated stocks (Zacks Rank #4 or 5) are best avoided.
Currently, SMART Global has a Zacks Rank #3 and an Earnings ESP of +0.75%, which indicates a likely positive surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Other Stocks to Consider
Here are a couple of other stocks that you may also want to consider as our model shows that these also have the right combination of elements to post a positive earnings surprise in the quarter to be reported.
Paychex, Inc. (PAYX - Free Report) has an Earnings ESP of +0.90% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
CSX Corporation (CSX - Free Report) has an Earnings ESP of +2.45% and a Zacks Rank #2.
eBay Inc. (EBAY - Free Report) has an Earnings ESP of +1.47% and a Zacks Rank #3.
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