Key Factors Likely To Drive Xilinx's (XLNX) Q2 Earnings

Xilinx Inc. (NASDAQ:XLNX) is slated to release second-quarter fiscal 2018 results on Oct 25. The question lingering in investors’ minds is whether this semiconductor company will be able to post a positive earnings surprise in to-be-reported quarter. Notably, Xilinx has delivered positive earnings surprises for six straight quarters. Over the trailing four quarters, the company delivered an average positive surprise of 7.4%. So, let’s see how things are shaping up prior to this announcement.

What to Expect?

The current Zacks Consensus Estimate for the quarter under review is pegged at 62 cents, which is a penny higher than the year-ago figure of 61 cents. We note that the Zacks Consensus Estimate remained unchanged over the past 60 days. Additionally, analysts polled by Zacks project revenues of roughly $620 million, up 7.1% from the year-ago quarter.

What the Zacks Model Unveils?

Our proven model conclusively shows that Xilinx is likely to beat earnings estimates this quarter. Per our model, a stock with a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold), has highest chance of beating estimate. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter. Xilinx currently carries a Zacks Rank #3 and has an ESP of +0.22%.

What’s Driving Better-Than-Expected Earnings?

Xilinx is set to capitalize on the global trend of field-programmable gate arrays (FPGAs) replacing application-specified integrated circuits (ASICs). There are certain fundamental advantages of using FPGAs over low-cost ASICs. One of the basic reasons is the difficulty in getting suitable ASICs for design and the additional cost of re-certifying new ASIC-based designs.

We expect FPGA products to drive the company’s revenues throughout fiscal 2018, aided by steady demand in communications industry, and continued strong adoption of its products in Automotive, ISM, Test and Aerospace and Defense markets. Moreover, design wins from other sectors such as wired communication, data center and industrial will add to revenues.

Furthermore, FPGAs are widely used in third generation (3G) and fourth generation long-term evolution (4G LTE) network connections. These markets are strongly co-related with global GDP growth and spending behavior. Most of the emerging economies are seeing unprecedented demand for mobile devices like smartphones and tablets, and are also getting increasingly connected via the Internet. This has compelled these countries to heavily invest in Telecom & Wireless infrastructure. We believe higher wireless deployments across the world will lead to increased demand for Xilinx’s 28-nm, 20-nm and 16-nm nodes, thereby positively impacting its overall fiscal second-quarter results.

Other Stocks With Favorable Combination

Here are some other companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

Applied Materials, Inc. (NASDAQ:AMAT) has an Earnings ESP of +0.37% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Avnet, Inc. (NYSE:AVT) has an Earnings ESP of +2.24% and a Zacks Rank #2.

Texas Instruments Incorporated (NASDAQ:TXN) has an Earnings ESP of +0.07% and a Zacks Rank #2.

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