Semiconductor Stock Earnings Slated For Oct 24: RMBS & ISIL

Earnings releases are picking up momentum with results from 81 S&P 500 members or 19.9% of the index’s total market capitalization already out (as of Oct 19).

As per the latest Zacks Earnings Trend report, total earnings of these 81 index members are up 3.8% year over year on the back of 3.6% higher revenues. Beat ratios are impressive with 80.2% beating EPS estimates and 63% coming in ahead of top-line expectations.

However, overall third-quarter earnings for S&P 500 companies are now expected to be down 1% (narrower than earlier estimate of -2.2%) from the year-ago quarter on revenues that are estimated to increase 1.5%.

Earnings for the Technology sector are now anticipated to be down 0.4% (narrower than previous estimate of -1.7%) based on 1% lower revenues. Apple’s guidance, which projects earnings decline of 19.8% on 9.1% lower revenues, will deal a major blow to earnings. Excluding Apple (NASDAQ:AAPL), earnings are estimated to grow 4.5%.

A few semiconductor companies are slated to report their earnings next week. The industry has been struggling for sometime due to a slowdown in China, strengthening dollar and a secular decline in the PC market.

However, Intel’s (NASDAQ:INTC) impressive third-quarter 2016 result is encouraging for the investors. The company is a dominant name in the industry and currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Here is a sneak peek into two semiconductor companies lined up to report earnings on Oct 24.

Rambus Inc. (NASDAQ:RMBS) is unlikely to beat third-quarter 2016 earnings estimates as it has an unfavorable combination of a Zacks Rank #4 (Sell) and an Earnings ESP of 0.00%.

This is because, as per our proven model, a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 or 3 (Hold) to beat earnings. Simultaneously, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Nevertheless, we believe that Rambus is well poised to capitalize on the rising popularity of energy-efficient lighting, LED products in the latest architectural, retail, commercial and residential lighting fixtures.

Additionally, licensing agreements — the result of successful monetization of Rambus’ patents — will continue to remain one of the major recurring revenue sources for the company, in our opinion. (Read More: What to Expect When Rambus Reports Q3 Earnings?)

We also note that Rambus results compared favorably with the Zacks Consensus Estimate in the last four quarters, with an average beat of 18.60%.

Chipmaker Intersil Corporation (NASDAQ:ISIL) is also unlikely to beat third-quarter 2016 earnings estimates based on the unfavorable combination of a Zacks Rank #4 and an Earnings ESP of 0.00%.

Intersil is a leader in the design and manufacture of high-performance analog semiconductors.The company will soon be acquired by Japan-based Renesas Electronics in a cash deal worth $3.2 billion.

We also note that Intersil results compared favorably with the Zacks Consensus Estimate in the last four quarters, with an average beat of 20.97%.

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