Cirrus Logic (CRUS) Q2 Earnings: Is A Surprise In Store?

Cirrus Logic Inc. (NASDAQ:CRUS) is set to report fiscal second-quarter 2017 results on Oct 27. Last quarter, the company posted a positive earnings surprise of 94.1%. Let's see how things are shaping up for this announcement.

Factors to Consider

Cirrus Logic is a premier supplier of high-performance analog circuits and advanced mixed-signal chip solutions. The company posted better-than-expected first-quarter fiscal 2017 results. The year-over-year comparisons on both the counts were however unfavorable.

Notably, as per revenue segments, Portable audio product revenues accounted for approximately 83% of the total revenue last quarter. Also, Cirrus Logic generates a significant portion (approximately 70%) of its revenues from Apple Inc. (NASDAQ:AAPL) . This means that there is always a risk of losing an Apple design contract, which will significantly hurt the company’s financials.

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.

CIRRUS LOGIC Price and EPS Surprise

Earnings Whispers

Our proven model does not conclusively show that Cirrus Logic will beat earnings estimates 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: The Earnings ESP for Cirrus Logic is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 94 cents per share.

Zacks Rank: Cirrus Logic has a Zacks Rank #3. Though a favorable Zacks Rank increases the predictive power of ESP, the company’s ESP of 0.00% 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.

Stocks to Consider

Here are a couple of companies which, as per our model, have the right combination of elements to post an earnings beat this quarter:

Amazon.com, Inc. (NASDAQ:AMZN) with Earnings ESP of +10.47% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here

HubSpot, Inc. (NYSE:HUBS) with Earnings ESP of +13.89% and a Zacks Rank #3

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