Semiconductor Stocks Earnings On Oct 27: CRUS, SYNA & POWI

With more than 800 companies set to report results this week, including 171 S&P 500 members, the earnings season is rapidly gaining momentum. Notably, after five consecutive quarters of decline, earnings are now anticipated to show positive growth.

As per the latest Zacks Earnings Preview report, overall third-quarter earnings for S&P 500 companies are anticipated to inch up 0.1% (compared to an earlier estimate of a decline of 1%) from the year-ago quarter on revenues that are estimated to increase 1.5%.

The growth is expected to be driven by impressive results from the Finance sector, which is anticipated to mitigate sluggish growth from the Energy, Auto and Transportation sectors.

However, growth from Technology - another large sector in the list - was estimated to remain muted due to lower earnings anticipation from Apple (NASDAQ:AAPL), a Zacks Rank #2 (Buy) stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Earnings for the technology sector were anticipated to be up 1.1% in spite of 1% lower revenues. Although Apple beat the fourth-quarter 2016 earnings estimates by a penny, we note that earnings declined 15% on a year-over-year basis while revenues fell 9.9%. We believe the decline will drag down Q3 earnings estimates for the technology sector. (Read More: Apple Q4 Earnings & Revenues Beat But Decline Y/Y)

Semiconductors comprise an important component of the technology sector and are expected to follow the same earnings growth trajectory in the quarter. Here, we take a look at three semiconductor companies set to report earnings on Oct 27:

Cirrus Logic Inc. (NASDAQ:CRUS) is unlikely to beat second-quarter fiscal 2017 earnings estimates as it has an unfavorable combination of a Zacks Rank #3 (Hold) 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, 2 (Buy) or 3 to beat earnings. Simultaneously, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into an earnings announcement, especially when the company is seeing negative estimate revisions.

We remain cautious about the company as the current global economic downturn might affect its business potential, going forward. Moreover, the company faces competition from the likes of Texas Instruments (NASDAQ:TXN) Inc. and STMicroelectronics, which remains a headwind.

Nonetheless, continued investments in the audio segment are expected to have a positive impact in the long run. Additionally, synergies from acquisitions and expansion in the LED market continue to drive growth. (Read More: Cirrus Logic Q2 Earnings: Is a Surprise in Store?)

We note that Cirrus Logic’s results compared favorably with the Zacks Consensus Estimate in three out of the last four quarters, with an average beat of 49.62%.

Synaptics Inc. (NASDAQ:SYNA) is also unlikely to beat first-quarter fiscal 2017 earnings estimates as it has an unfavorable combination of a Zacks Rank #3 and an Earnings ESP of 0.00%. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.

The company remains focused on enhancing its Automotive Solutions and Touch and Display Driver Integration (TDDI) and fingerprint portfolio. We expect the company to benefit from a recovering iPhone market in the to-be reported quarter. Also, ongoing restructuring initiatives and a strong shareholder repurchase plan will cushion the company’s earnings. Moreover, strategic acquisitions like Renesas SP Drivers, which have greatly expanded its offerings, are added positives.

However, intensifying competition and ongoing troubles in China can prove to be a headwind for the company as it derives a significant portion of its revenues from the region. (Read More: Synaptics to Report Q1 Earnings: What's in Store?)

We note that Synaptics’ results have missed the Zacks Consensus Estimate in one out of the last four quarters, with an average negative surprise of 35.47%.

Power Integrations Inc. (NASDAQ:POWI) too is unlikely to beat third-quarter 2016 earnings estimates as it has an unfavorable combination of a Zacks Rank #3 and an Earnings ESP of 0.00%.

During the first half of the year, Power Integration continued to gain traction in the smartphone charger market with its InnoSwitch line of products. Management expects revenues to hover in the range of $96 million to $102 million in the to-be reported quarter.

Notably, Power Integration’s results have beaten the Zacks Consensus Estimate in the trailing four quarters with an average positive surprise of 20.62%.

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