Can Cypress (CY) Surprise this Earnings Season? - Analyst Blog


Cypress Semiconductor Corporation ( CY ) is set to report second-quarter 2014 results on Jul 17. Last quarter, it posted a 125% positive surprise. Let's see how things are shaping up for this announcement.

Factors this Past Quarter

The company's first-quarter loss was narrower than the Zacks Consensus Estimate by 3 cents due to tight operating expense control. Also, revenues were above the higher end of management's guidance on the back of improvement in all divisions, especially continued higher demand for TrueTouch products.

Gross margins were down 20 basis points year over year due to unfavorable product and customer mix.

For the second quarter, Cypress expects revenues in the range of $181.0-$186.0 million, and gross margin to be approximately 51.0%, which will vary with manufacturing product mix. Non-GAAP earnings per share are likely to be in the range of 11-13 cents. The Zacks Consensus Estimate for earnings is pegged at 3 cents, much lower than the company's guided range.

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:   Both the Most Accurate estimate and the Zacks Consensus Estimate stand at 3 cents. Hence, the difference is 0.00%.

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

We caution against stocks with Zacks Rank #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

You could consider other stocks with a positive Earnings ESP and a Zacks Rank #1, 2 or 3 such as:

Gentex Corp. ( GNTX ), with anEarningsESP of +2.08% and a Zacks Rank #1 (Strong Buy).

AmSurg Corp. ( AMSG ), with an Earnings ESP of +3.13% and a Zacks Rank #1.

Kirby Corporation ( KEX ), with an Earnings ESP of +3.08% and a Zacks Rank #1.

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

This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: AMSG , CY , GNTX , KEX

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