Semtech Corporation (SMTC - Free Report) is set to report fiscal fourth-quarter 2019 results on Mar 13. In the last reported quarter, it delivered a positive earnings surprise of 8.70%.
The company’s surprise history has been pretty impressive. It beat estimates in each of the last three quarters, with average of 20.72%.
Let’s see how things are shaping up for this announcement.
Factors at Play
Semtech reported strong fiscal third-quarter 2019 results, with earnings and revenues beating the respective Zacks Consensus Estimate.
The company’s improved profitability was driven by differentiated growth drivers and diversification strategy. The key growth drivers for Semtech are product differentiation, operational flexibility, along with a specific focus on fast-growing segments and regions.
In the last reported quarter, the industrial and communications end markets both experienced strong demand and increased sequentially, representing 30% and 11% of its total revenues, respectively.
The growing need for more efficient energy management in home and industrial settings, increasing electronic system requirements for mobile devices, along with the propagation of green standards will continue driving demand in these segments.
However, concerns about the company’s exposure to seasonality, a competitive market and foreign exchange risks persist.
For fiscal fourth-quarter 2019, management expects revenues on a non-gap basis in the range of $155-$165 million.
Non-GAAP gross profit margin is expected within 61.5-62.5%. Management projects SG&A expenses within $26.5-$27.5 million, and research and development expenses in the range of $24.5-$25.5 million. Non-GAAP earnings per share are expected in the range of 53-57 cents.
Our proven model does not conclusively show that Semtech will beat on earnings in the to-be-reported quarter. This 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.
Earnings ESP: The company’s Earnings ESP is -5.13%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Semtech currently carries a Zacks Rank #3, which when combined with a negative ESP, makes surprise prediction difficult.
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
We see a likely earnings beat for each of the following companies in the upcoming releases:
The Boeing Company (BA - Free Report) has an Earnings ESP of +0.94% and carries a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Comcast Corporation (CMCSA - Free Report) has an Earnings ESP of +7.94% and a Zacks Rank #3.
Thermo Fisher Scientific Inc. (TMO - Free Report) has an Earnings ESP of +1.47% and a Zacks Rank #3.
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