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Will Alliance Fiber (AFOP) Disappoint on Q1 Earnings? - Analyst Blog

Alliance Fiber Optic Products Inc.AFOP is set to report first-quarter 2015 results on Apr 22 after the closing bell. Last quarter, the company posted a negative surprise of 4.35%. Let's see how things are shaping up for this announcement.

Factors to Consider

Over the past few months, the company has witnessed positive customer experience along with expansion in product line that will likely boost its top-line growth. Additionally, management remains optimistic about the recovery of Datacom market with improvement in local demand and expects this trend to continue, going forward.

Further, Alliance Fiber Optic projects steady growth in the optical communication markets on the back of increased bandwidth demand and impressive recovery of the U.S economy. Despite temporary sluggishness in the telecom market, the company believes it will unfold significant commercial opportunities in 2015.

Alliance Fiber Optic also predicts that capital expenditures will continue to increase in the datacenter markets throughout 2015, on expectations of a rapid transitional drive to 10G service communications. Additionally, the company expects an architectural shift in datacenter markets toward intensive fiber-rich mesh-type networks, which would greatly boost its top-line growth. Considering current booking levels as well as favorable market trends, management predicts first-quarter 2015 revenues in the range of $20-$22 million.

Earnings Whispers

Despite favorable trends, our proven model does not conclusively show that Alliance Fiber Optic will beat earnings this season. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen. This is not the case here as you will see below.

Zacks ESP: Expected Surprise Prediction or ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is currently pegged at 0.00%. This indicates likely in-line earnings for the shares.

Zacks Rank: Alliance Fiber Optic's Zacks Rank #3, when combined with 0.00% Earnings ESP, makes surprise prediction difficult. Note that stocks with a Zacks Ranks of #1, #2 and #3 have a significantly higher chance of beating earnings.

Notably, 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.

Stocks to Consider

Here are some companies that investors may want to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:

Dana Holding Corporation DAN , with an Earnings ESP of +6.38% and a Zacks Rank #3.

Apple Inc. AAPL , with an Earnings ESP of +2.79% and a Zacks Rank #2.

American Eagle Outfitters AEO , with an Earnings ESP of +18.18% and a Zacks Rank #2.

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AMER EAGLE OUTF (AEO): Free Stock Analysis Report

ALLIANCE FIBER (AFOP): Free Stock Analysis Report

DANA HOLDING CP (DAN): 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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