Will Advanced Micro (AMD) Disappoint This Earnings Season? - Analyst Blog


Advanced Micro Devices, Inc. ( AMD ) is set to report fourth-quarter 2013 results on Jan 21. Last quarter, it posted a 100% positive surprise. Let us see how things are shaping up for this announcement.

Growth Factors this Past Quarter

Advanced Micro's third-quarter earnings exceeded the Zacks Consensus Estimate of 2 cents owing to solid execution and cost control management. Revenues were up 25.8% sequentially and 15.1% year over year. It is the highest sequential revenue growth rate in the past five years. The solid growth was driven by a 109.7% jump in the Graphics and Visual Solutions segment, primarily from the ramp up of semi-custom System-on-Chips ( SoCs).

However, gross margins of 35.7% decreased sequentially but were up 480 basis points (bps) from the year-ago quarter. The sequential decrease was due to unfavorable mix and higher-than-expected operating expenses.

For the fourth quarter, AMD expects fourth-quarter 2013 revenues to increase 5.0% (+/- 3.0%) sequentially. Non-GAAP gross margin is expected to be 35%. Operating expenses are expected to remain flat sequentially at approximately $450.0 million.

Earnings Whispers?

Our proven model does not conclusively show that AMD will 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 Most Accurate estimate stands at 5 cents while the Zacks Consensus Estimate is higher at 6 cents. That is a difference of -16.67%.

Zacks Rank #4 (Sell): 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

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

Bally Technologies, Inc. ( BYI ), with Earnings ESP of +3.13% and a Zacks Rank #1 (Strong Buy).

Western Digital Corporation ( WDC ), with Earnings ESP of +0.48% and a Zacks Rank #1.

Cirrus Logic Inc. ( CRUS ), with Earnings ESP of +4.41% and a Zacks Rank #1.

ADV MICRO DEV (AMD): Free Stock Analysis Report

BALLY TECH INC (BYI): Free Stock Analysis Report

CIRRUS LOGIC (CRUS): Free Stock Analysis Report

WESTERN DIGITAL (WDC): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

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: AMD , BYI , CRUS , WDC



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