Amkor Technology (AMKR) Q3 Earnings: Surprise In Store?

Amkor Technology, Inc. (NASDAQ:AMKR) is expected to report third-quarter 2016 results on Oct 31. Last quarter, the company posted a positive earnings surprise of 125%.

Let us see how things are shaping up for this announcement.

Factors to Consider

Amkor’s second-quarter results were above the high end of management expectations driven by strong Android smartphone demand. Also, faster-than-expected recovery at the company’s earthquake-damaged Kumamoto factory led to strong results.

Amkor has made noticeable progress in some of its key areas. The company’s System-in-Package (SiP) business grew significantly. Also, automotive sales increased.

Last year, Amkor completed the acquisition of J-Devices Corporation to strengthen its foothold in the automotive market. The acquisition made Amkor the world’s largest OSAT provider for automotive ICs. Management said that the acquisition would add $800 million to the company’s revenue this year.

While end market demand is expected to remain stable with particular strength in China where the company is picking up market share, earthquakes in Japan could have an impact on its upcoming quarter results.

The company expects third-quarter revenues in the range of $1.01 billion to $1.09 billion, up 10% to 19% sequentially. Management expects revenue to be driven by the launch of mobile devices across multiple tiers. Earnings per share are expected in the range 12 cents to 28 cents.

Earnings Whispers

Our proven model does not conclusively show that Amkor will beat on 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 20 cents. Hence, the difference is 0.00%.Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.

Zacks Rank: Amkor carries a Zacks Rank #2, which increases the predictive power of ESP. But the company’s 0.00% ESP makes surprise prediction difficult.

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.

Stock to Consider

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

Ashford Hospitality Prime, Inc. (NYSE:AHP) is slated to report third-quarter earnings results on Nov 2. The company has an Earnings ESP of +9.76% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Alibaba Group Holding Limited (NYSE:BABA) with an Earnings ESP of +2.13% and a Zacks Rank #1. The company is slated to report second-quarter fiscal 2017 earnings results on Nov 2.

Avon Products Inc. (NYSE:AVP) with an Earnings ESP of +33.33% and a Zacks Rank #1. The company is slated to report third-quarter earnings results on Nov 3.

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