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Semiconductor Stocks' to Post Earnings on Jan 30: RMBS, IDTI

The fourth-quarter 2016 earnings season has commenced on a better note than the preceding quarter, with Finance sector being the key driver of positive results. As per the latest Earnings Trend report, as of Jan 26, 148 S&P 500 members representing 29.5% of the index's total market capitalization have already reported quarterly numbers.

Total earnings of these companies are up 5.9% on a year-over-year basis (68.2% of the companies beat EPS estimates) while total revenue is up 2.3% on a year-over-year basis (55.4% of the companies beat top-line estimates).

Notably, earnings and revenue growth numbers are better than the previous quarters and look poised to cross the highest level in the last eight quarters. However, positive earnings surprises are tracking low at this stage compared with the previous quarter.

Overall fourth-quarter earnings for S&P 500 companies are anticipated to be up +5.3% (up from earlier expectation of +4.8%) from the year-ago quarter on revenues that are estimated to increase +3.8% (up from +3.7%). This would be better than the +3.8% growth in third-quarter earnings on +2.3% higher revenues driven by easier year-over-year comparisons for the Energy sector, continuing momentum at Finance and anticipated improvement in Technology results.

Notably, Technology is one of the three sectors that has been a prolific performer in terms of positive surprises. Almost 29.6% of the total market capitalization in the technology sector has reported till now. Out of this 73.9% has beaten earnings estimates and 78.3% has surpassed revenue estimates.

Moreover, total earnings for these companies are up +7.8% from the same period last year on +1.1% higher revenues. Earnings for the Technology sector are anticipated to grow 4.7% (up from initial expectation of 3.6%) on the back of 4.4% higher revenues.

The upcoming week will see a number of technology companies reporting that includes semiconductors like Advanced Micro AMD and Qorvo QRVO . The industry has been struggling for sometime due to a slowdown in China, strengthening dollar and a secular decline in the PC market.

However, rapidly expanding Internet of Things (IoT) market is driving growth for chip components to power applications particularly automotive, medical/healthcare and smart devices. This bodes well for semiconductor stocks.

Here we take a look at two semiconductor companies that are set to report their quarterly earnings on Jan 30:

Rambus IncRMBS is unlikely to beat fourth-quarter 2016 expectations as it has an unfavorable combination of a Zacks Rank #3 (Hold) and an Earnings ESP of 0.00%.You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

This is because, as per our proven model, a stock needs to have both a positive Earnings ESP and a Zacks Rank #1(Strong Buy), 2 (Buy) or 3 to beat earnings. You can see the complete list of today's Zacks #1 Rank stocks here .

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

Notably, Rambus' results compared favorably with the Zacks Consensus Estimate in the trailing four quarters, resulting in an average positive surprise of 21.33%.

Rambus, Inc. Price and EPS Surprise

Rambus, Inc. Price and EPS Surprise | Rambus, Inc. Quote

Rambus is well poised to capitalize on the rising popularity of energy-efficient lighting, LED products in the latest architectural, retail, commercial and residential lighting fixtures. The company's ongoing restructuring is expected to yield favorable results. Additionally, licensing agreements - the result of successful monetization of Rambus' patents - will continue to remain one of the major recurring revenue sources for the company.

However, we note that Rambus shares have underperformed the Zacks Electronics Semiconductor industry in the last one year. While the stock has gained 14.9%, the industry has returned 87.2% in the same period. We believe increasing competition and customer concentration risks will remain a headwind in the near term.

Integrated Device Technology Inc.IDTI also looks unlikely to beat third-quarter fiscal 2017 estimates as it has an unfavorable combination of a Zacks Rank #4 (Sell) and an Earnings ESP of 0.00%. Notably, Integrated Device has beaten the Zacks Consensus Estimate in three out of the last four quarters, with an average positive surprise of 3.93%.

Integrated Device products continue to gain traction in the computing, communications and automotive markets. Additionally, collaboration with the likes of IBM is positive for the stock. However, increasing competition is a significant headwind that will weigh on share price in 2017.

Integrated Device Technology, Inc. Price and EPS Surprise

Integrated Device Technology, Inc. Price and EPS Surprise | Integrated Device Technology, Inc. Quote

Notably, shares have gained 6.9% in the past one year, which is lower than the Zacks Electronics Semiconductor industry's return.

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Qorvo, Inc. (QRVO): Free Stock Analysis Report

Rambus, Inc. (RMBS): Free Stock Analysis Report

Advanced Micro Devices, Inc. (AMD): Free Stock Analysis Report

Integrated Device Technology, Inc. (IDTI): Free Stock Analysis Report

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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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