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Will Linear Technology's (LLTC) Earnings Surprise in Q3? - Analyst Blog

Linear TechnologyLLTC is set to report third-quarter fiscal 2015 results on Apr 14. Last quarter, the company posted 4.08% positive earnings surprise. Let's see how things are shaping up for this announcement.

Factors to Consider

Linear's second-quarter earnings of 51 cents beat the Zacks Consensus Estimate by a couple of cents. The results were aided by lower income tax rate, partially offset by lower volumes. Also, revenues were up year over year driven by stronger sales across automotive, industrial and communication markets.

Linear's business is well-diversified among core markets, such as industrial, automotive and communications infrastructure. The company's solid business model and excellent products could generate strong third-quarter revenues. However, its computing business could be hit by weakness in the PC and notebook markets.

Margin of 75.4% was down 60 basis points (bps) sequentially but up 10 bps from the year-ago quarter.

For the third quarter, management expects revenues to increase 4% to 7% sequentially. The strong revenue guidance for the next quarter reflects better bookings momentum in the automotive and industrial markets and an improving macroeconomic global environment.

Earnings Whispers

Our proven model does not conclusively show that Linear 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 53 cents. Hence, the difference is 0.00%.

Zacks Rank: Linear's Zacks Rank #2 (Buy) increases the predictive power of ESP. However, we need to have a positive ESP to be confident of an earnings beat.

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

Stocks to Consider

You could consider the following stocks with a positive Earnings ESP and a favorable Zacks Rank:

Allison Transmission Holdings, Inc. ALSN , with an Earnings ESP of +9.23% and a Zacks Rank #1.

Broadcom Corp. BRCM , with an Earnings ESP of +5.00% and a Zacks Rank #1.

SVB Financial Group SUI , with an Earnings ESP of +1.16% and a Zacks Rank #2 (Buy).

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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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