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Will Advanced Micro (AMD) Beat Earnings Estimates in Q3?

We expect Advanced Micro Devices, Inc.AMD to beat expectations when it reports third-quarter 2015 results on Oct 15.

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 ingredients.

Zacks ESP : Earnings ESP , which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at +41.67%. This is very meaningful and a leading indicator of a likely positive earnings surprise for shares.

Zacks Rank: Advanced Micro has a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating earnings estimates. The Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.

The combination of Advanced Micro's Zacks Rank #3 and +41.67% ESP makes us reasonably confident in looking for an earnings beat.

What is Driving the Better-than-Expected Earnings?

Advanced Micro's strong market position, compelling new products, superior product designs, continued innovation and increasing semi-custom system-on-chip sales should boost third-quarter earnings.

Additionally, the company is diversifying its business into newer markets and increasing investments in the embedded business to lower its dependence on the PC market. Given the consistent product enhancements and design wins from strategic players in key verticals such as digital signage and medical equipment, we expect the strong momentum in the embedded business to continue.

Advanced Micro is also targeting the communications, industrial and gaming markets where it has secured some important design wins. The company's increased game console wins, a more conducive market, solid position in graphics and good execution are expected to boost results in the to-be-reported quarter.

However, the ongoing weakness in Advanced Micro's consumer PC business, combined with the decline in global PC demand, remains a concern.

Other Stocks to Consider

Advanced Micro is not the only firm looking up this earnings season. We also see likely earnings beats coming from these companies:

eBay Inc. EBAY , with an Earnings ESP of +3.13% and a Zacks Rank #2.

Thermo Fisher Scientific, Inc. TMO , with an Earnings ESP of +1.69% and a Zacks Rank #2.

Microsoft Corporation MSFT , with an Earnings ESP of +1.72% and a Zacks Rank #3.

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THERMO FISHER (TMO): Free Stock Analysis Report

MICROSOFT CORP (MSFT): Free Stock Analysis Report

EBAY INC (EBAY): Free Stock Analysis Report

ADV MICRO DEV (AMD): 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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