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


Advanced Micro Devices, Inc. ( AMD ) is set to report first-quarter 2014 results on Apr 17. Last quarter, it posted in-line results. Let's see how things are shaping up for this announcement.

Growth Factors this Past Quarter

Advanced Micro's fourth-quarter earnings of 6 cents were in line with the Zacks Consensus Estimate due to higher revenues. Revenues were up 8.8% sequentially and 37.6% year over year. The solid growth was driven by strong performance in the Graphics and Visual Solutions segment, higher revenues from semi-custom System-on-Chips (SoCs) and ramp up of the new R7 and R9 series of GPU products.

However, gross margins of 34.8% decreased sequentially but were up significantly from the year-ago quarter. The sequential decrease was due to unfavorable mix and higher-than-expected operating expenses.

For the first quarter, AMD expects revenues to decrease 16.0% (+/- 3.0%) sequentially. Non-GAAP gross margin is expected to be 35.0%. Operating expenses are expected to be approximately $420.0 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 : Both the Most Accurate estimate and the Zacks Consensus Estimate stand at 0 cent. Therefore, the ESP for the stock is 0.00%.

Zacks Rank : AMD sports a Zacks Rank #1 (Strong Buy) which 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

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

E-Commerce China Dangdang Inc. ( DANG ), with Earnings ESP of +33.33% and a Zacks Rank #1 (Strong Buy).

ON Semiconductor Corp. ( ONNN ), with Earnings ESP of +6.67% and a Zacks Rank #1.

Yelp, Inc. ( YELP ), with Earnings ESP of +33.33% and a Zacks Rank #2 (Buy).

ADV MICRO DEV (AMD): Free Stock Analysis Report

E-COMMRC CH-ADR (DANG): Free Stock Analysis Report

ON SEMICON CORP (ONNN): Free Stock Analysis Report

YELP INC (YELP): 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 , DANG , ONNN , YELP



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