Will OmniVision (OVTI) Disappoint This Earnings Season? - Analyst Blog


OmniVision Technologies ( OVTI )is set to report third-quarter fiscal 2014 results on Feb 27. Last quarter, it posted 62.1% positive surprise. Let's see how things are shaping up for this announcement.

Growth Factors this Past Quarter

OmniVision's second-quarter fiscal 2014 earnings were above the Zacks Consensus Estimate driven by strong revenue growth coupled with better gross margins and solid expense management. Additionally, revenues were up sequentially on the back of strength in the mobile phone and entertainment markets.

Gross margins expanded in the quarter attributable to improved production yields for 1-megapixel and 5-megapixel products. Operating margin of 6.3% was also up 180 basis points (bps) sequentially and 270 bps from the year-ago quarter.

For the third quarter, OmniVision expects revenues in the range of $310.0-$340.0 million, down 18.2% sequentially. The company estimates GAAP earnings per share in the range of 14-30 cents and non-GAAP earnings, excluding share-based compensation and the associated tax impact, in the range of 28-44 cents per share.

Earnings Whispers?

Our proven model does not conclusively show that OmniVision 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 21 cents. Hence, the difference is 0.00%.

Zacks Rank: OmniVisionhas 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

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

Baidu, Inc. ( BIDU ), with Earnings ESP of +0.72% and a Zacks Rank #1 (Strong Buy).

Ship Finance International Limited ( SFL ), with Earnings ESP of +52.63% and a Zacks Rank #1

Safe Bulkers, Inc. ( SB ), with Earnings ESP of +5.26% and a Zacks Rank #1

BAIDU INC (BIDU): Free Stock Analysis Report

OMNIVISION TECH (OVTI): Free Stock Analysis Report

SAFE BULKERS (SB): Free Stock Analysis Report

SHIP FIN INTL (SFL): 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: BIDU , OVTI , SB , SFL



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