) to beat expectations when it reports second-quarter 2014 results
on Jul 24.
Why a Likely Positive Surprise?
Our proven model shows that Altera is likely to beat earnings
because it has the right combination of two key ingredients.
Positive Zacks ESP:
, which represents the difference between the Most Accurate
estimate (38 cents per share) and the Zacks Consensus Estimate (37
cents per share), stands at +2.70%. This is very meaningful and a
leading indicator of a likely positive earnings surprise for
Altera currently has a Zacks Rank #2 (Buy). Note that stocks with
Zacks Rank #1, 2 and 3 have a significantly higher chance of
beating earnings. The Sell-rated stocks (#4 and 5) should never be
considered going into an earnings announcement.
The combination of Altera' Zacks Rank #2 and +2.70% ESP makes us
very confident in looking for a positive earnings beat.
What is Driving the Better-Than-Expected
Altera is witnessing higher revenues from its FPGA offerings.
FPGAs are widely used in third generation (3G) and fourth
generation long-term evolution (4G LTE) network connections. A
higher percentage of FPGAs per base station allows higher data
bandwidth. We believe Altera is well equipped with FPGA product
suites (Stratix, Arria and Cyclone) to gain share in the growing
Altera's transition to 14-nanometer (nm) FPGAs in association
) is likely to be a competitive differentiator. Intel will be
making chips for Altera using its 14-nm trigate transistor
Altera is currently manufacturing its chips using 28-nm
processes. We believe that this will help Altera to strengthen its
product portfolio and offer more comprehensive and high-value
Moreover, the continued share buybacks are expected to support
the company's bottom line, going forward.
Altera has done well in the recent past, consistently beating
our estimates. The positive trend is seen in the trailing
four-quarter average surprise of 9.26%, which was greatly helped by
the 15.63% surprise in the last-reported quarter.
Other Stocks to Consider
Here are some other companies you may want to consider as our
model shows that they have the right combination of elements to
post an earnings beat this quarter:
F5 Networks, Inc.
), with an Earnings ESP of +3.81% and a Zacks Rank #2.
Western Digital Corp
), with an Earnings ESP of +4.02% and a Zacks Rank #2.
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WESTERN DIGITAL (WDC): Free Stock Analysis
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