We expect online retailer chip maker
Advanced Micro Devices Inc
) to beat expectations when it reports fourth quarter 2012
results on January 22nd.
Why a Likely Positive Surprise?
Our proven model shows that Advanced Micro is likely to beat
earnings because it has the right combination of two key
: The Earnings Surprise Prediction or ESP, which represents the
difference between the Most Accurate estimate and the Zacks
Consensus Estimate, is at +30.0%. This is very meaningful and a
leading indicator of a likely positive earnings surprise for
ZacksRank #3 (Hold):
Note that stocks with Zacks Ranks of #1, #2 and #3 have a
significantly higher chance of beating earnings estimates. The
sell-rated stocks (Zacks Rank #4 and #5) should never be
considered going into an earnings announcement.
The combination of Advanced Micro's Zacks Rank #3 (Hold) and
+30.0% ESP makes us reasonably confident about looking for a
positive earnings beat on January 22nd.
What is Driving the Better than Expected Earnings?
Given the weak PC market, Advanced Micro's decisionto
diversify its business into new embedded markets along with the
recent restructuring initiatives are likely to lead to a positive
earnings surprise in the upcoming quarter.
The company is diversifying its business into new embedded
markets, including communication, industrial and gaming among
others. It expects to increase the revenue contribution from its
embedded business to almost 20% from the mere 5% level at which
it is currently. The restructuring initiatives will reduce the
company's expense base by 25%.
AMD's recent launch of various new chips including its Opteron
processors are suitable for use in cloud infrastructures and will
help the company to increase its share in the server market and
better compete with
) server chips . As cloud servers represent a high-volume market,
these efforts could have a positive impact on AMD's fourth
The positive trend is also seen in the trailing four-quarter
average surprise of 3.20%.
Other Stocks to Consider
is not the only firm looking up this earnings season. We also see
likely earnings beats coming from these 2 stocks:
), with Earnings ESP of 3.64% and Zacks Rank #2 (Buy)
), with Earnings ESP of 20.69% and Zacks Rank #3 (Hold)
ADV MICRO DEV (AMD): Free Stock Analysis
AMAZON.COM INC (AMZN): Free Stock Analysis
EXPEDIA INC (EXPE): Free Stock Analysis
INTEL CORP (INTC): Free Stock Analysis Report
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