Will Peregrine Semiconductor (PSMI) Incur Wider Q3 Loss? - Analyst Blog

Peregrine Semiconductor Corporation ( PSMI ) is set to report third-quarter 2014 results on Oct 27. Last quarter, the company posted a positive earnings surprise of 14.3%. Let us see how things are shaping up for this announcement.

Peregrine has posted losses in three of the last four quarters, although it beat the Zacks Consensus Estimate on both counts in the last-reported quarter. The company's reported loss of 18 cents per share beat the consensus by 3 cents.

With roughly two-thirds of its revenue coming from Japanese company Murata, Peregrine has been struggling to diversify its customer base. But its acquisition by Murata finally enables shareholders to liquidate their holdings. Murata is offering a 62% premium on the prices prevailing at the time of the announcement, and PSMI share prices have soared accordingly.

Quick Look at the Last Quarter

Its second quarter 2014 revenues of $47 million beat the Zacks Estimate by $3 million. Revenues were primarily driven by stronger shipments and handset switches for all major OEMs. The company also benefited from the extended life of its previous design wins. OEMs are increasing their shipments of mid-range LTE smartphones, expanding demand for their products and extending the life of many of their design wins.

The company expects revenues in the third quarter to be in the range of $40 million to $43 million, given a decline in shipments of switches for cell phones.

As a result of the favorable resolution of the RFMD litigation, the company expects to see a reduction in legal costs in the third quarter.

Earnings Whispers?

Our proven model does not conclusively show that Peregrine 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 -11 cents. Hence, the difference is 0.00%.

Zacks Rank: Peregrine currently carries a Zacks Rank #2 (Buy). 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.

Other Stocks to Consider

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

Facebook Inc. ( FB ) has an Earnings ESP of +6.25% and a Zacks Rank #2.

Seagate Technology Public Ltd. ( STX ) has an Earnings ESP of +4.80% and a Zacks Rank #3 (Hold).

Mercadolibre, Inc. ( MELI ) has an Earnings ESP of +6.25% and a Zacks Rank #3.

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MERCADOLIBRE IN (MELI): 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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