Can Cypress (CY) Keep the Earnings Streak Alive? - Analyst Blog

By Zacks Equity Research,

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Cypress Semiconductor Corporation ( CY ) is set to report fourth-quarter 2013 results today after markets close. Last quarter, it posted a 100% positive surprise. Let's see how things are shaping up for this announcement.

Growth Factors this Past Quarter

The company's third-quarter earnings were above the Zacks Consensus Estimate by a couple of cents due to higher gross margins and tight operating expense control. However, revenues were down sequentially due to weakness in the mobile handset market.

Gross margins expanded 140 basis points sequentially due to favorable customer mix and continued cost-reduction efforts.

For the fourth quarter, Cypress expects revenues in the range of $163.0 million-$170.0 million, and gross margin to be approximately 52.5%, which will vary with manufacturing product mix. Non-GAAP earnings per share are likely to be in the range of 7 cents-9 cents (down 54.3% sequentially at the mid-point).

Earnings Whispers?

Our proven model does not conclusively show that Cypress is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP:   The Earnings ESP for the stock is 0.00%.

Zacks Rank #3 (Hold): Cypress' Zacks Rank #3 when combined with a 0.00% ESP makes surprise prediction difficult.

We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Other Stocks to Consider

Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:  

Waddell & Reed Financial, Inc. ( WDR ), with Earnings ESP of +2.44% and a Zacks Rank #1 (Strong Buy).

Affymetrix Inc. ( AFFX ), with Earnings ESP of +66.67% and a Zacks Rank #1

Western Digital Corporation ( WDC ), with Earnings ESP of +0.96% and a Zacks Rank #1

AFFYMETRIX INC (AFFX): Free Stock Analysis Report

CYPRESS SEMICON (CY): Free Stock Analysis Report

WESTERN DIGITAL (WDC): Free Stock Analysis Report

WADDELL&REED -A (WDR): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Earnings , Stocks
Referenced Stocks: AFFX , CY , WDC , WDR

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