Can Tessera Technologies' (TSRA) Earnings Surprise in Q3? - Analyst Blog

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Tessera Technologies Inc. ( TSRA ) is slated to report third-quarter 2014 results on Oct 30. In the last-reported quarter, Tessera recorded a phenomenal positive earnings surprise of 1400%. Let's see how things are shaping up for this announcement.

Factors to Consider This Past Quarter

Tessera reported strong second-quarter 2014 results with both the top and bottom lines exceeding the Zacks Consensus Estimate. The company's FotoNation technology contributed record revenues in the quarter as the technology continued to see greater adoption by leaders in the wireless handset market. The extended relationship with Samsung also helped recurring revenue growth.

Recently, the California state court confirmed Tessera's arbitration award of $128,335,504 plus post-judgment interest against Amkor Technology, Inc. ( AMKR ). Also, the U.S. Patent Office confirmed the patentability of key claims in a Tessera patent that Amkor had challenged in an inter partes review ("IPR") proceeding. The patent was one of several issues in the arbitration.

The company is on the right track following its exit from DOC industrial operations. It has lowered its operating expenses, redirected investment to areas with growth potential and secured several patent licensing agreements. A number of patent litigations have also been settled in its favor. Moreover, new licensing deals on the anvil will further increase its revenue and improve its profitability.

Tessera recently named Craig Mitchell as chief technology officer and President of its wholly-owned subsidiary, Invensas Corporation. Mitchell will drive the development and commercialization of xFD, BVA, and 2.5D/3D interconnect technologies as well as efforts to expand the Invensas portfolio of interconnect technologies.

Let's see whether Mitchell's first earnings as a CTO posts a surprise.

Earnings Whispers

Our proven model does not conclusively show that Tessera is likely to beat earnings this quarter as it does not have the right combination of two key ingredients. 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 71 cents. Hence, the difference is 0.00%.

Zacks Rank : Tessera currently has a Zacks Rank #2 (Buy). Though Zacks Ranks #1, 2 or 3 increase the predictive power of ESP, the company's ESP of 0.00% makes surprise prediction difficult.

We caution against stocks with a Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks That Warrant a Look

Here are some companies you may want to consider as our model shows these have the right combination of elements to post an earnings beat:

  • TE Connectivity Ltd. ( TEL ) has an Earnings ESP of +2.13% and a Zacks Rank #3
  • Mercadolibre, Inc. ( MELI ) has an Earnings ESP of +6.25% and a Zacks Rank #3

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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