What Awaits Marvell Technology (MRVL) In Q4 Earnings?

Marvell Technology Group Ltd. (NASDAQ:MRVL) is set to report fourth-quarter fiscal 2016 results on Jul 19, 2016. Let's see how things are shaping up for this announcement.

Factors at Play

Marvell posted lower-than-expected third-quarter fiscal 2016 results. Not only did it post a loss but the top line also compared unfavorably with the Zacks Consensus Estimate. Also, revenues fell on a year-over-year basis mainly due to lower revenues from its networking business and soft performance in the storage end markets.

Though the macro headwinds and stringent regulations might put the company's financials under pressure, we believe that strong demand for Marvell’s 4G LTE products could be a growth driver. This will be supplemented with growth from the company’s wide range of newly-launched Internet of Things (IoT) solutions.

Moreover, Marvell is a promising player in the solid state drive (SSD) controllers market. Over the coming years, it expects an increasing number of PCs/servers to use flash-based solid state technology for storage. SSD demand will also increase and could even surpass manufacturing capacity, leading to periodic shortage and higher pricing in the to-be reported quarter. Marvell is benefiting from growing demand for SSD products.

However, competition in the semiconductor market from major players such as Intel Corp. (NASDAQ:INTC) and Texas Instruments (NASDAQ:TXN) Inc. remains a headwind.

Earnings Whispers

Our proven model does not conclusively show that Marvell will beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) 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 1 cent. Hence, the difference is 0.00%.

Zacks Rank: Marvell’s Zacks Rank #3 when combined with a 0.00% ESP makes surprise prediction difficult.

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

Stocks to Consider

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

QUALCOMM Incorporated (NASDAQ:QCOM) with Earnings ESP of +3.61% and a Zacks Rank #2

Amazon.com, Inc. (NASDAQ:AMZN) with Earnings ESP of +37.72% and a Zacks Rank #3