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Will Netgear (NTGR) Disappoint this Earnings Season? - Analyst Blog

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Netgear Inc. ( NTGR ) is set to report the third-quarter fiscal 2014 results on Oct 23. Last quarter, the company posted a 6.52% positive surprise. The company has posted an average positive earnings surprise of 6.56% over the past four quarters.

Let's see how things are shaping up for this announcement.

Growth Factors in the Past Quarter

Netgear expects third-quarter revenues in the range of $345 to $360 million, with non-GAAP operating margin in the 9.5% to 10.5% range.

We believe that improving sales execution, particularly in the European market will be a key growth catalyst for Netgear. Additionally, a strong product portfolio is expected to drive the top line, going forward.

However, stiff competition in the network attached storage market (NAS) from the likes of EMC Corp ( EMC ) remains a major concern.

Earnings Whispers?

Our proven model does not conclusively show that Netgear is likely to 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. This is not the case here as you will see below.

Zacks ESP : Netgear currently has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 52 cents.

Zacks Rank : Netgear has a Zacks Rank #3 (Hold), which when combined with a 0.00% ESP, makes surprise prediction difficult.

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

Other Stocks to Consider

Here are some stocks worth considering that, as per our model, have the right combination of elements to post an earnings beat this quarter:

Facebook ( FB ), with an Earnings ESP of +6.25% and a Zacks Rank #2 (Buy).

InvenSense ( INVN ), with an Earnings ESP of +10.00% and a Zacks Rank #2.

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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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